SINGAPORE (July 3): Shares in Noble Group tumbled on June 27, after Fitch Ratings cut the embattled commodities supplier’s credit rating once again and signalled a possible default. The counter fell 4.7% in intraday trading before closing at 50.5 cents. Fitch slashed Noble’s credit rating late on June 23, its third downgrade since mid-May, as uncertainty continues to mount over Noble’s profitability and ability to meet its debt obligations. Fitch said it had downgraded Noble’s long-term foreign-currency issuer default rating to “CCC” from “B-”. Noble’s senior unsecured rating and the ratings on its entire outstanding senior unsecured notes were also downgraded to “CCC” from “B-”, the agency said in a statement accompanying the downgrade.
Fitch noted that the downgrade follows “continued uncertainty regarding Noble’s funding capacity and how this will affect its operation at its current business scale”. The rating agency added that while it recognises Noble’s effort to sell part of the group or its assets to aid in the restructuring of its business, “visibility over the form or success of any transaction is low, given current market conditions”.
As Noble continues its search for a strategic investor to restore investor confidence in the aftermath of a collapse in its share and bond prices, the company announced on June 26 that it has sold three subsidiaries for a total of US$4.7 million ($6.5 million).
On June 22, Noble revealed in a filing to the exchange that Goldilocks Investment, an Abu Dhabi fund, had become a substantial shareholder, following an acquisition of 50.5 million shares on June 20. This followed a purchase of 15.5 million shares the day before. Goldilocks, which is controlled by investor Jassim Alseddiqi’s Abu Dhabi Financial Group, now has a 5.03% stake in Noble.
Takata slumps as bankruptcy looms
Shares in Japanese airbag maker Takata Corp slumped as much as 69% on June 28, after the Tokyo Stock Exchange removed the daily price limit on the stock.
This comes after Takata filed for bankruptcy protection in Japan and the US on June 26, and saying its CEO would quit after a deadly airbag crisis that triggered the auto industry’s biggest-ever safety recall. Takata will also sell most of its auto safety products business for nearly US$1.6 billion to Key Safety Systems, which is owned by Chinese automotive conglomerate Ningbo Joyson Electronic.
The moves are the latest in a long-running drama involving the company, which is facing a slew of lawsuits and huge liabilities stemming from a defect that saw its faulty airbag inflators being blamed for at least 17 deaths and many more injuries. More than 100 million cars with Takata airbags, including around 70 million vehicles in the US, have been recalled since concerns first emerged in 2007. Takata has yet to identify the cause of the airbag failures, and has admitted that it is not clear how many of the airbags are still in vehicles on the roads.
In January, Takata reached an agreement with the US justice department to pay US$1 billion in penalties for concealing dangerous defects and pleaded guilty to a single criminal charge. But Takata’s legal troubles have yet to be resolved. It faces further legal action in the US and liabilities amounting to ¥1 trillion ($12.3 billion).
The stock has since pared some of its losses, climbing 8.6% to close at ¥38 on June 29. The counter will be delisted on July 27.
TalkMed sinks on CEO’s suspension
Shares in healthcare firm TalkMed Group plunged 14.1% to close at 64.5 cents on June 28, after the company announced in a filing with the Singapore Exchange that Ang Peng Tiam, the company’s executive director and CEO, had been given an eight-month suspension by the Court of Three Judges on grounds of professional misconduct.
During the eight-month period, Ang will not be involved in any patient care as a doctor but will continue to lead the group and develop other growth opportunities. All of Ang’s outstanding cases will be handed over to his colleagues, including TalkMed chief operating officer Khoo Kei Siong.
The suspension — effective from July 25 — is in relation to a 2010 complaint filed by the family of a deceased patient. Ang was found guilty of falsely representing to the patient her chances of a favourable response to his prescribed therapy, and failing to offer her the option of surgery.
Noting that it is “operationally sound and on a firm financial footing”, TalkMed said in its filing that it was confident that the suspension would not have a major long-term effect on the group, although the verdict might have a material impact on its earnings.
RHB Research Institute Singapore is maintaining its “buy” call on the counter, with a lower price target of 73 cents, from $1.03 previously. As a result of the suspension, the research house has lowered its FY2017 and FY2018 earnings forecasts for the group by 18% and 15%, respectively. RHB expects the incident to affect TalkMed’s earnings negatively, as Ang serves as a key contributor to the group’s profitability. However, analyst Jarick Seet says he remains “confident of TalkMed’s prospects and [expects] it to be resilient despite the weakening outlook of foreign medical tourists in Singapore”.
Shares in TalkMed Group closed 5.4% higher at 68 cents on June 29.
Enigma Network hits Hong Kong stocks
Shares in Hong Kong-listed umbrella maker China Jicheng Holdings suffered a meltdown on June 27, plunging 94.3% to close at 1.6 HK cents. It was one of 17 counters that collectively lost HK$47.8 billion ($8.5 billion) in market value in the crash. Hong Kong’s smallcap Growth Enterprise Market (GEM) plunged more than 9% that day.
Traders pointed to links between some of the companies and Lerado Financial Group Company — a brokerage that is under regulatory investigation. Hong Kong’s securities regulator suspended trading in Lerado’s shares on June 6, alleging that a company circular dated October 2015 included “materially false, incomplete or misleading information”.
Lerado had previously disclosed an investment in China Jicheng. As at Dec 31, the brokerage owned almost 1.5 billion shares in China Jicheng.
At the heart of the dramatic crash was a report titled “The Enigma Network: 50 stocks not to own”. The report was issued six weeks ago by activist investor David Webb, who is also a former director of Hong Kong Exchanges and Clearing (HKEx). In his report, Webb argued that the companies were entwined in a complex web of cross-shareholdings that had pushed their valuations to unsustainable levels.
The stocks highlighted by Webb in his report accounted for all but three of the 20 biggest losers in Hong Kong on June 27. Thirty- eight of the 50 stocks flagged by Webb declined.
Earlier this month, HKEx had proposed sweeping changes to the scandal-hit GEM. These included higher minimum market value requirements and tighter rules on when controlling shareholders could sell their stakes.
Euro posts biggest single-day gain
The euro surged to a one-year high against the dollar in a year, after European Central Bank president Mario Draghi hinted in a speech at a central bank conference in Portugal that the ECB might start winding down its stimulus programme in response to better recovery in the European Union.
Investors reacted to Draghi’s comments by buying euros and selling eurozone bonds. The euro reached US$1.1426 on June 29. The currency is up 8.1% against the US dollar this year. The yield on government debt in countries such as Germany and Italy also rose sharply.
What to look out for
On July 3, Singapore will release the Purchasing Managers’ Index for June. On July 6, the US Federal Reserve will release minutes of the Federal Open Market Committee meeting ended on June 14.
