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Falling Knife of the Week: Sky One Holdings

SkyOneLogoSky One Holdings Limited (SGX: 5MM) has fallen 78.7% so far this week to become our “Falling Knife of the Week”. The shares closed at $0.10 on Thursday. To some of its shareholders, it was a scary Halloween.

Sky One is in the freights and logistics business and is based in China and Hong Kong. Its primary business focus is in providing turn-key import customs clearance, express land transport, international airfreight and household/exhibition removal & packaging services. The company made a loss of S$56.8 million for its latest financial year that ended March 2013, as compared to a profit of S$151.7 million the previous year.

On Monday, 28th of October, the stock plunged as much as 91% in the morning and this prompted the market regulator, Singapore Exchange (SGX), to issue a trading query. SGX questioned if the company was aware of any information not previously announced that may have caused the erratic price movement. In its reply, Sky One said that “all known information has been duly announced in accordance with the listing rules of the SGX-ST and the Company and its Directors are not aware of any information not previously announced concerning the Company and its subsidiaries which, if known, might explain the trading on 28 October 2013.”

The company also went on to say that with regards to the proposed acquisition of Energy Prima Pte Ltd as announced on 28 September 2012, 10 October 2012 and 25 September 2013, the due diligence work with regards to the acquisition is still ongoing. It added that there has been no material change in the Sky One’s existing businesses of Express Land Transport, Airfreight and Coal Logistics since 31 March 2013, which is the latest full financial year of the company.

The plunge in Sky One’s price brought about the dark memories of the freefall of Asiasons Capital Limited (SGX: 5ET), Blumont Group Limited (SGX: A33) and LionGold Corp Limited (SGX: A78) that happened on 4th of October 2013. On that fateful Friday morning, around $5.2 billion was wiped off the three companies. The shares were then suspended and they were assigned as designated securities by SGX. Trading has resumed back to normal for the three companies.

The differences in regulatory actions by SGX on the trio but not on Sky One puzzled some traders. To clear the air, SGX released an announcement on 30th October 2013, stating that, “not all sharp price movements, whether up or down, warrant a suspension of the stock” and that “each occurrence has to be evaluated on its own merit in the context of circumstances of the case.”

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