The Myanmar theme that has been in vogue in the stock market this year played out again this week in the case of bedlinen company Aussino Group.
The company's share price almost doubled after it called a trading halt in the middle of Monday's trading session to announce that it would start selling petrol in Myanmar.
This would be done by the S$60 (US$47) million reverse takeover of Max Strategic Investments, which intends to operate petrol kiosks in Myanmar after the acquisition.
This promises to change the fortunes of beleaguered Aussino, which was placed on the Singapore Exchange's watchlist last September after recording three consecutive years of losses.
While companies on the watchlist are given a timeframe to turn around their businesses, or face possible delisting, Aussino continued to bleed cash, recording a net loss of S$1.04 million in its third quarter ended March 31.
It lost S$4.39 million for the nine months starting from last July, attributing the poor performance to a fall in sales because of closed stores and counters in China.
The company's home furnishings business operates in Australia, China, Malaysia and Singapore, where it has outlets in 12 locations.
So it was no surprise that investors were enthused by Aussino's change in direction. In addition, Myanmar is touted as the new frontier for high-paced business growth after a raft of political and economic reforms.
Aussino's shares jumped 22 percent on Monday and another 46 percent on Tuesday before more muted movements towards the end of the week.
The company has gained 8.2 cents this week, or 96 percent, closing at 16.7 cents on Friday. The stock is trading at its highest levels since 2008.
The heightened interest can be seen in trading volumes. A daily average of 20.3 million Aussino shares changed hands this week, up from an average of 556,000 over the past year.
Even a report on Friday that cast doubt on the reverse takeover deal failed to douse enthusiasm, with the counter putting on 1.3 cents or 8 percent.
Max Strategic Investments is part of the Max Myanmar group. The group, headed by Myanmar businessman Zaw Zaw, will gain majority control of Aussino as a result of the transaction.
But Reuters has reported that Zaw Zaw is on a US government blacklist of “Specially Designated Nationals” because of his friendship with former strongman Than Shwe. The assets of the people on the list are blocked and US citizens are generally prohibited from dealing with them.
Reuters reported that the Singapore authorities could be wary about letting a company list here if there are question marks over the owners, and if there is a risk of provoking political sensitivities.
Other stocks with exposure to Myanmar also performed well this week. Property developer Yoma Strategic Holdings gained 7 percent and Ntegrator International, a communications network specialist and systems integrator, rose 31 percent.
“Many people are optimistic about Myanmar because of the recent political changes,” said remisier Gary Goh. “In the long run, it's a growth story to look at as the population is younger.”
But he noted “the Myanmar play is still a concept play” and said investors need to remember their investments still boil down to the fundamentals of each company. He added investors must be aware of the risks that companies face, especially with regard to regulations in developing countries. (mtq)