Some companies are not content with an IPO on one stock exchange and seek a secondary listing on another stock exchange. There are many reasons for this, and the most popular ones include the ability to raise money from another bourse, or to be closer to where their principal customers are located. For example, a company may be listed in Singapore but has the bulk of its customers in Hong Kong and China. It therefore seeks to dual-list in Hong Kong in order to establish a presence there.
Another reason for seeking a dual listing could be that a company’s shares are poorly traded and “under-appreciated” in Singapore. Thus, a listing on another stock exchange could help to boost liquidity (since the company will obtain exposure to investors in two different markets), and it may also boost valuation multiples (if the investors in the country of the dual-listed exchange are able to recognise the merits of the company).
I took a look at two companies that recently sought a dual-listing on the Hong Kong Stock Exchange (HKG: 388) and tracked their share-price performance since then to see if there was any valuation or recognition “benefit” that may have been priced into the share price post-dual-listing.
1. LHN Ltd
LHN Ltd (SGX: 41O) is a real estate management services group that generates value for its landlord and tenants through space optimisation. The group also provides complete facilities management and logistics services.
LHN had, in December 2017, offered 42 million new shares at HK$1.90 each (around S$0.325 each) to raise around S$13.7 million in gross proceeds. The bulk of the proceeds was supposed to be used for the expansion of the group’s space optimisation business by acquiring a new property in Singapore.
The Hong-Kong listed shares started trading on 29 December 2017 and opened at HK$3.25. In Singapore, the shares traded at S$0.24 on the same day. Fast-forward to the present: LHN’s shares now trade around S$0.16 in Singapore and HK$0.77 in Hong Kong. LHN’s latest quarterly results show a year-on-year drop in revenue of 11.8% and a year-on-year decline in net profit of 37.4%.
2. SIIC Environment
SIIC Environment (SGX: BHK) deals with wastewater treatment, water supply, solid waste management, and other environmental-related businesses. It boasts an overall portfolio of 180 water treatment and supply projects and five waste incineration projects across 19 municipalities and provinces in China.
In March 2018, SIIC sought a dual listing in Hong Kong to improve the liquidity of its shares. It was also hoping to be able to access investors in both Singapore and Hong Kong as its business was primarily focused in China.
Trading began on 23 March 2018 in Hong Kong, and the share price in Singapore at the time was S$0.51, while the share price in Hong Kong closed at HK$3.13. Today, the share prices on the Singapore and Hong Kong bourses are S$0.28 and HK$1.65, respectively. In its latest quarter, SIIC reported a 13.4% year-on-year increase in revenue and a 30% year-on-year increase in net profit.
The Foolish conclusion
In the two examples above, a dual listing has not helped either company’s share price perform well as the share prices of both companies have declined significantly post-dual listing. Ultimately, the share price is a function of how well the underlying business is performing, and the dual listing alone is not an effective method of boosting the share price if the underlying business is struggling or facing challenges.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.