Mainboard-listed Avarga, in a response to a query by Singapore Exchange Regulation (SGX RegCo), is unaware of what might have caused the unusual spike in its share price earlier today.

However, the company is exploring a possible spin-off of its paper manufacturing business. It is also mulling a “possible transaction" which will allow it to monetise its investment in the power plant in Myanmar, says CEO Ian Tong.

“There is no assurance as to whether any transaction will materialise or as to the structure of any such transaction. The company will make appropriate announcements in the event that there are any material developments in this regard,” he adds.

From the previous close of 15.4 cents, Avarga’s share price surged as high as 22.5 cents, or 46.1%, before closing at 19.5 cents on Aug 24, or 26.62% higher.

Unusually, it was also among the tenth most heavily-traded counters today, triggering the query from the regulator at 11.44am.

Avarga’s executive chairman is Tong Kooi Ong, who is also chairman of The Edge Media Group, the parent company of the publisher of The Edge Singapore. Ian is also an executive director of The Edge Media Group.

Avarga, previously known as UPP Holdings, has a paper manufacturing business in Malaysia that produces around 10% of brown packaging paper used to wrap parcels.

From just RM3 million ($983,739) back in FY2011, pre-tax profit of this business has grown steadily to hit a record of RM30.7 million for FY2018 before dipping to RM24.6 million the following year.

The company’s power plant near Yangon, Myanmar, has a 30-year offtake agreement with the government that expires in Feb 2044. According to the company in a presentation from two months ago, it has already recouped the investment of US$46.5 million ($63.8 million).

Avarga’s main revenue and earnings come from its Canada-based building products business, which reported a 6% y-o-y increase in revenue to $692.5 million for the six months ended June 30 2020. Gross profit in the same period increased by 17.8% y-o-y to nearly $75 million.

In its response to SGX, the company notes that this business has reported “strong earnings growth”, given recent strong demand in housing and home renovation projects in North America.

For the half year ended June 30, Avarga, as a whole, reported a 5% y-o-y increase in revenue to $720.3 million. Earnings, however, dropped 37% y-o-y to $14.9 million, as the year-earlier bottomline enjoyed a one-off lift of $10.9 million from the sale of a property.

On June 25, the company announced a new dividend policy of paying out no less than 40% of earnings attributable to shareholders. Rare among non-REITs, the dividends will be paid quarterly. The new policy will take effect from the second half of the current financial year ending Dec 2020.  

On Aug 17, the company bought back 539,800 shares at prices ranging from 14.7 cents to 15 cents. Under the current mandate, Avarga can buy back up to 94.7 million shares.