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Three Shares That Lost To the Market Today

The Straits Times Index (SGX: ^STI) has dipped by 0.2% to 3,204 points despite only having nine out of its 30 constituents logging losses for the day while 15 others had made some headway.

Even though some blue chips had dropped by a fair bit, most of the downward action had actually taken place outside the index. Let’s take a look at some of those shares outside the index that did worse than the market today.

AsiaPhos (SGX: 5WV) sank by 13.2% to S$0.165 after announcing that it’s in the process of obtaining an expansion for exploration rights for one of its phosphate mines in China. Previously, the exploration right it held for the particular mine would be expiring on 9 April 2014 and it had sought an expansion of the exploration rights back in Dec 2013. As 9 April has come and gone and the company’s still in the process of obtaining regulatory approval for the expansion, it warned that its business might be “adversely affected” if it cannot continue its commercial activities on the mine.

That might be what had spooked the market, though the company went on to stress that its application for the expansion of its exploration rights “will be granted in due course.”

Meanwhile, AsiaPhos also answered the Singapore Exchange’s query on possible reasons for its sharp 20.3% rise to S$0.19 yesterday. In its reply, AsiaPhos commented that it’s “presently in discussions to explore the possibility of potential corporate exercise(s)” though no other details were given. The company also added that stock market research firms Voyage Research and NRA Capital had both given it positive ratings back in late March this year, which the company could be a possible reason for the sharp jump in price yesterday.

The aptly-named China-based construction outfit Sino Construction (SGX: F3V) has slipped by 7.7% to S$0.156. On Tuesday, the company had revealed that it would be issuing up to S$16 million worth of convertible bonds that would come due in 2017. The deal’s structured such that the borrower (Sino Construction) can borrow S$500,000 or any multiples of that amount up to 32 times for a maximum total loan of S$16 million.

These bonds also have a conversion price of S$0.16 a share and could be converted into a maximum of 100 million shares of Sino Construction. For comparison’s sake, Sino Construction currently has 1.32 billion shares outstanding.

In any case, Sino Construction’s looking at proceeds of S$15.85 million after deduction of relevant expenses with four-fifths of that sum ear-marked for business expansion needs while the remaining’s meant for general working capital purposes.

The company’s latest balance sheet shows it having RMB24.9 million (approximately S$5 million) in cash with no debt. The company also does not have any operating businesses to speak of after having sold them hence there’s no way it could generate cash anymore. If it’s looking to build new businesses and require funds to do so, it can only accomplish that in 2 ways: 1) Issuing equity; or 2) Take on debt. From the looks of it, it seems the company’s chosen the second option.

Etika International Holdings (SGX: 5FR) closed at S$0.46 for a 5.2% decline. The milk products manufacturer and distributor just announced this morning that it’s looking to sell its dairies and packaging business to Asahi Group Holdings Southeast Asia Pte. Ltd.

Etika’s dairies and packaging business is “one of the world’s largest manufacturers and distributors of sweetened condensed milk” and has products that are exported to 70 countries. Meanwhile, the buyer’s actually part of the Japanese-listed and Japan-based food & beverage conglomerate Asahi Group Holdings (beer drinkers might want to know that the Asahi brand of beers belongs to the conglomerate).

The dairies and packaging business is pegged to be worth US$328.8 million (around RM1.06 billion) and actually comprises 111% of Etika’s pre-tax profit for the quarter ended 31 Dec 2013. So, Etika would be in effect, selling its main profit driver. In any case, Etika’s looking at an accounting gain of RM626 million if the business is sold.

Nothing’s final now though as the sale would have to be approved by shareholders and there are still kinks in the deal that Etika and Asahi would have to work through.

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