Last Friday, three shares – Blumont Group (SGX: A33), Asiasons Capital (SGX: 5ET), and LionGold Corp (SGX: A78) – were suspended from trading by the Singapore Stock Exchange after experiencing falls of 40% to 60% that were preceded by rapid increases in their share prices.
Since then, the trading suspensions have been lifted. But, the carnage has continued. As of Tuesday’s close, Blumont, Asiasons and LionGold have dropped 94%, 96%, and 87% respectively from their closing prices on last Thursday.
While investors might be wondering what really transpired behind the scenes to cause the three shares to plunge, the real story can be traced back to 2007.
A painful loss
The debacle involving those three shares prompted a friend of mine to share with me a digital newspaper clipping that was published on The New Paper back in Oct 2007.
The story was about a lady named Dawn Zeng who had lost S$55,000 while speculating on penny stock Uni-Asia Finance (SGX: C3T). She bought the stock on a tip that it was “hot”, and “didn’t know anything about [the company].”
She bought 50,000 shares of the company at a price of S$2.20 on a contra-trade, which meant that she would not be required to pay for the shares until three days later. Her initial plan was to sell those shares within those three days, hoping to make a profit on the expectation that Uni-Asia’s shares would continue to rocket.
The company went public on August 2007 at an offering price of S$0.55 but had quadrupled in value to a high of S$2.79 by 15 Oct 2007. Its sharp ascent was what made it “hot” and attracted speculators like Zeng.
But the fundamentals of the company weren’t robust enough to sustain those share prices and soon enough, it fell to a low of S$1.00 on 25 Oct 2007.
In the interim, Zeng was forced to sell her shares at S$1.10, booking a total loss of S$60,000. She had to pay-off that sum of money with five years’ worth of savings that she and her finance had accumulated. Even their upcoming wedding on Feb 2008 had to be postponed as their savings had been wiped out.
And all that happened because of a single speculative bet that went wrong.
The lessons to be drawn
So there we have it, Zeng’s story with speculation that ended on a sorry note. And if we dig in further, there are strong parallels to be drawn with what happened to Uni-Asia and the trio of Blumont, Asiasons, and LionGold.
There was the strong price ascent prior to their share price collapse: Uni-Asia’s share price gained 407% in two short months; Blumont was at six cents on Aug 2012, and had hit a high of S$2.45 (an increase of 3980%) barely a year later on 30 Sep 2013; Asiasons’ price grew 197% in just nineteen days from 1 Sep 2013 to 19 Sep 2013; LionGold had increased in value by 50% from 1 Aug 2013 to 27 Aug 2013.
Then, there were the stretched valuations that these shares had. Uni-Asia was valued at 39 times its historical earnings at its peak of S$2.79; Blumont was selling for 500 times its trailing earnings and 60 times its book value at some point prior to its collapse; Asiasons carried a price-earnings ratio of 583 before last Friday’s shellacking; as a company, LionGold did not even have any profits to speak of for its last 12 months and yet carried a market value of S$1.42b on last Thursday.
So, we can see that six years ago there was a company – carrying an inflated share price that’s hard to justify with its business fundamentals – that collapsed suddenly in price after a sharp run-up. What happened with Blumont, Asiasons, and LionGold is not new.
While there can be many technical reasons for the collapse in share prices for those four companies – conspiracy theorists might even point to price manipulation – I’ve written before that “there are times when it will be obvious that a share price is over inflated. In cases like that, the simple solution is to just walk away.”
But for an investor to just simply “walk away” there has to be the recognition that over the long-term share prices are driven by the fundamentals of the business. And that, is the real story behind Blumont, Asiasons, and LionGold.
It was very likely that there were market participants who bought into the shares of the trio while blindfolded, betting on a price increase simply because its price has risen before. There was simply no recognition of the fact that the fundamentals of a business are what sustains the price of a share over the long-term.
Blind-betting might work for some, but it’ll likely end up in disaster for many, with Zeng being just one such example.
Foolish Bottom Line
Investors have to realise that over the long-term, the shares of a company are only worth as much as the aggregate amount of profits and cash flows that its businesses can make over its life-time. Without strong fundamentals – competitive positions, cash flows, profits, assets, dividends etc. – there’s no way high share prices can be sustained.
It’s a message you might find me repeating many times over here at The Motley Fool Singapore. But I’ll run the risk of sounding like a broken radio. It really is a message that’s worth harping on, and on, and on….
http://www.fool.sg/2013/10/09/the-real-story-behind-blumont-asiasons-and-liongold/
Saturday, December 21, 2013
LionGold
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LionGold Corp Ltd has rapidly established itself in the global gold mining industry and now holds 7.5 million ounces of gold resources, with 900,000 ounces classified as reserves. Since March 2012, interests in eight gold exploration and mining companies have been acquired, of which one wholly-owned subsidiary is in production. Primary concessions are in Australia, Ghana, Bolivia, and Canada.
Our focus will remain, to raise gold resources to 10 million ounces, reserves to 2 million ounces, and production to 200,000 ounces per annum by the end of 2014, through acquisitions and organic growth.
LionGold Corp Limited has rapidly established itself in the global gold mining industry and now holds 7.5 million ounces of gold resources, with 900,000 ounces classified as reserves. Since March 2012, interests in eight gold exploration and mining companies have been acquired, of which one wholly-owned subsidiary is in production. Primary concessions are in Australia, Ghana and Bolivia, and Canada. Future expansion will be achieved through further acquisitions and organic growth.
The Group aims to become a global gold producer and is initially targeting minimum gold resources of 10 million ounces, reserves of 2 million ounces, and annual production of 200,000 ounces per annum by the end of 2014. Acquisition prospects today will have scalable resources with scope for rapid enhancement. Targets include mining companies and projects across a range of geographies which are in production, or which are poised to start commercial production within 12 to 18 months. The intention behind this selective approach is to unlock asset value while building out the gold business.
http://www.liongoldcorp.com/about-us/corporate-profile/
Our focus will remain, to raise gold resources to 10 million ounces, reserves to 2 million ounces, and production to 200,000 ounces per annum by the end of 2014, through acquisitions and organic growth.
LionGold Corp Limited has rapidly established itself in the global gold mining industry and now holds 7.5 million ounces of gold resources, with 900,000 ounces classified as reserves. Since March 2012, interests in eight gold exploration and mining companies have been acquired, of which one wholly-owned subsidiary is in production. Primary concessions are in Australia, Ghana and Bolivia, and Canada. Future expansion will be achieved through further acquisitions and organic growth.
The Group aims to become a global gold producer and is initially targeting minimum gold resources of 10 million ounces, reserves of 2 million ounces, and annual production of 200,000 ounces per annum by the end of 2014. Acquisition prospects today will have scalable resources with scope for rapid enhancement. Targets include mining companies and projects across a range of geographies which are in production, or which are poised to start commercial production within 12 to 18 months. The intention behind this selective approach is to unlock asset value while building out the gold business.
http://www.liongoldcorp.com/about-us/corporate-profile/
Platinum Partners invested in Asiasons, Blumont, LionGold before share collapse
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Asiasons,
Blumont,
LionGold,
Lynne Ng Su Ling,
Mohammad Azlan Hashim,
Platinum Partners,
Wira Dani Daim
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In tracing the sudden collapse of the shares of three listed Singapore-based companies with reported Malaysian links, The Edge cast a spotlight on US hedge fund Platinum Partners Value Arbitrage Fund’s role had in inflating share prices beyond their value.
According to The Edge, Platinum Partners was initially poised to pay hundreds of millions in dollars for new shares in the three firms - investment firm Asiasons Capital, gold miner LionGold Corp Ltd and natural resources investment company Blumont Group Ltd - which would have bumped up investors’ confidence and potentially yield hefty profits.
But the deals fell through after the October 4 share collapse, which saw Singapore’s market regulator stepping in to briefly suspend trading of the three’s shares and classifying them as designated shares with strict trading conditions.
“Collectively, therefore, Platinum Partners would have invested up to US$560 million (RM1.8 billion) in Asiasons, Blumont and LionGold. This would represent more than half of its assets of US$1 billion. That appears to be a hefty bet on the three companies.
“The injection of fresh funds into the three companies by Platinum Partners are supposed to be monies for more acquisitions, which would perpetuate the positive sentiment surrounding their stocks, instilling greater investor confidence and, in turn, likely push their share prices even higher,” the financial weekly said.
“Such acquisitions over the past two years have had magnified impact on LionGold and Blumont’s share prices and more recently, that of Asiasons, well beyond the actual investment amounts.
“The ‘well-laid’ plans were scuttled by the collapse in the share prices of the three companies on Oct 4,” The Edge added.
In analysing how the suprise share collapse had happened, The Edge listed down a series of events including short-selling of shares in all three firms; share-selling by an insider at Blumont and LionGold; shareholders getting wind of the risk that share prices will eventually drop as more shares continued to be issued, as well as the dumping of shares on October 4.
The Edge suggested that all these events had then triggered the price collapse on October 4.
“Firstly, the build-up in short-selling activity preceding the collapse not only capped the share price but also absorbed most of the market’s buying interest in the three companies, especially after the huge gains seen in September.
“Secondly, savvy investors might have noticed this and decided to either cash out or stay out of the game. It dawned on the market that the fundamentals of the three companies cannot back up the astronomical gains,” it said.
On Monday, international news agency Reuters reported that the three firms - whose shares’ values dropped by S$5 billion (RM12.7 billion) in under one hour of trading - were all linked through an intricate network of influential businessmen in Malaysia.
Basing it on public filings and the latest annual reports available, Reuters said Asiasons was the largest shareholder in LionGold.
Among those named by Reuters was Asiasons’ co-founder and chairman Mohammad Azlan Hashim, who is currently a director of Malaysian investment arm Khazanah Nasional and formerly the executive chairman of the Kuala Lumpur Stock Exchange.
One of LionGold’s non-executive director is Datuk Wira Dani Daim - the son of Malaysia’s former finance minister Tun Daim Zainuddin - who remains a major shareholder after recently trimmed his 6.35 stake in the company to a 4.62 stake.
Lynne Ng Su Ling is an independent director in both LionGold and Blumont, Reuters said.
http://www.themalaymailonline.com/money/article/platinum-partners-invested-in-asiasons-blumont-liongold-before-share-collap
According to The Edge, Platinum Partners was initially poised to pay hundreds of millions in dollars for new shares in the three firms - investment firm Asiasons Capital, gold miner LionGold Corp Ltd and natural resources investment company Blumont Group Ltd - which would have bumped up investors’ confidence and potentially yield hefty profits.
But the deals fell through after the October 4 share collapse, which saw Singapore’s market regulator stepping in to briefly suspend trading of the three’s shares and classifying them as designated shares with strict trading conditions.
“Collectively, therefore, Platinum Partners would have invested up to US$560 million (RM1.8 billion) in Asiasons, Blumont and LionGold. This would represent more than half of its assets of US$1 billion. That appears to be a hefty bet on the three companies.
“The injection of fresh funds into the three companies by Platinum Partners are supposed to be monies for more acquisitions, which would perpetuate the positive sentiment surrounding their stocks, instilling greater investor confidence and, in turn, likely push their share prices even higher,” the financial weekly said.
“Such acquisitions over the past two years have had magnified impact on LionGold and Blumont’s share prices and more recently, that of Asiasons, well beyond the actual investment amounts.
“The ‘well-laid’ plans were scuttled by the collapse in the share prices of the three companies on Oct 4,” The Edge added.
In analysing how the suprise share collapse had happened, The Edge listed down a series of events including short-selling of shares in all three firms; share-selling by an insider at Blumont and LionGold; shareholders getting wind of the risk that share prices will eventually drop as more shares continued to be issued, as well as the dumping of shares on October 4.
The Edge suggested that all these events had then triggered the price collapse on October 4.
“Firstly, the build-up in short-selling activity preceding the collapse not only capped the share price but also absorbed most of the market’s buying interest in the three companies, especially after the huge gains seen in September.
“Secondly, savvy investors might have noticed this and decided to either cash out or stay out of the game. It dawned on the market that the fundamentals of the three companies cannot back up the astronomical gains,” it said.
On Monday, international news agency Reuters reported that the three firms - whose shares’ values dropped by S$5 billion (RM12.7 billion) in under one hour of trading - were all linked through an intricate network of influential businessmen in Malaysia.
Basing it on public filings and the latest annual reports available, Reuters said Asiasons was the largest shareholder in LionGold.
Among those named by Reuters was Asiasons’ co-founder and chairman Mohammad Azlan Hashim, who is currently a director of Malaysian investment arm Khazanah Nasional and formerly the executive chairman of the Kuala Lumpur Stock Exchange.
One of LionGold’s non-executive director is Datuk Wira Dani Daim - the son of Malaysia’s former finance minister Tun Daim Zainuddin - who remains a major shareholder after recently trimmed his 6.35 stake in the company to a 4.62 stake.
Lynne Ng Su Ling is an independent director in both LionGold and Blumont, Reuters said.
http://www.themalaymailonline.com/money/article/platinum-partners-invested-in-asiasons-blumont-liongold-before-share-collap
Celsius’ Executive Chairman, Alex Molyneux, conditionally acquires an interest in 5.2% of Blumont Group and has been nominated to be Chairman of Blumont
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Alex Molyneux,
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Celsius Coal
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Celsius Coal Limited (ASX Code: CLA) (Celsius or the Company) notes the recent announcement by Blumont Group Ltd ("Blumont") (SGX:BLUM) that the Company’s Executive Chairman Alex Molyneux, in cooperation with Pacific Advisers Pte Ltd ("Pacific Advisers"), has conditionally acquired 135,000,000 Blumont shares, representing approximately 5.2% of the total outstanding issued shares of Blumont, post rights issue.
Mr. Molyneux has agreed, subject to completion of the share purchase, to join Blumont as its Chairman. Blumont views this proposed appointment as a crucial step in fast-tracking its evolution as a major diversified natural resources company. In the meantime, Mr Molyneux will immediately become a consultant to and Chairman-designate of the Blumont Group and will formally assume the role as Chairman upon completion of the share purchase transaction. The transaction is subject to a number of conditions and is not expected to close for 30 days.
Celsius’ Board welcomes the strengthening of ties between Celsius and Blumont (Celsius’ major shareholder with a current holding of 11.4%). As Celsius’ major shareholder, Blumont has provided support through recent market uncertainties and continues to be actively involved in assisting Celsius progress towards production from its Uzgen Basin Projects. Mr Molyneux’s increased involvement with Blumont will allow Celsius to work more closely with Blumont to enable its work programmes to remain fully funded.
The non-associated members of the board will continue to monitor progress and ensure that the right level of independence is maintained in light of these developments and that any potential or perceived conflicts of interest are avoided.
http://www.theage.com.au/business/markets/quotes/announcement/CLA/celsius-coal-limited/1451765
Blumont sued by Australian miner Prospect Resources
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Singapore-listed Blumont Group, one of a trio of penny stocks that crashed in October, is facing additional woes.
The mining group is being sued by Australian miner Prospect Resources, over its decision to terminate a deal to invest A$3.9 million ($4.5 million) in the company.
On Oct 31, Blumont announced it was scrapping the deal as it was of the view that the Australian firm could not fulfil a critical condition: that of getting the paperwork done for Prospect Resources' acquisition of two gold projects in Zimbabwe.
Blumont, along with related companies Asiasons Capital and LionGold Corp, saw a meteoric rise in its share price for the first nine months of the year before its counter plummeted in October.
http://www.straitstimes.com/breaking-news/money/story/troubled-blumont-sued-australian-miner-over-scrapped-investment-plans-2013
The mining group is being sued by Australian miner Prospect Resources, over its decision to terminate a deal to invest A$3.9 million ($4.5 million) in the company.
On Oct 31, Blumont announced it was scrapping the deal as it was of the view that the Australian firm could not fulfil a critical condition: that of getting the paperwork done for Prospect Resources' acquisition of two gold projects in Zimbabwe.
Blumont, along with related companies Asiasons Capital and LionGold Corp, saw a meteoric rise in its share price for the first nine months of the year before its counter plummeted in October.
http://www.straitstimes.com/breaking-news/money/story/troubled-blumont-sued-australian-miner-over-scrapped-investment-plans-2013
Asiasons Capital sees lapsed share placement
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Efforts to raise $254 million in fresh capital by Asiasons Capital were not realised, and this places fresh selling pressure on its share price.
A share placement exercise would have seen about 212,59 million new shares, but it has since lapsed, said the private equity firm on Monday.
It wanted to raise funds to strengthen its financial position and capital base, to make sure cash was available for opportunities in the mineral and oil and gas industries.
The investors were supposed to be Carnegie Hall Group, Spring Road Advisors, and the New York-based Partner Growth Capital and Platinum Partners Value Arbitrage Fund.
http://www.straitstimes.com/breaking-news/money/story/asiasons-capital-sees-lapsed-share-placement-20131216
A share placement exercise would have seen about 212,59 million new shares, but it has since lapsed, said the private equity firm on Monday.
It wanted to raise funds to strengthen its financial position and capital base, to make sure cash was available for opportunities in the mineral and oil and gas industries.
The investors were supposed to be Carnegie Hall Group, Spring Road Advisors, and the New York-based Partner Growth Capital and Platinum Partners Value Arbitrage Fund.
http://www.straitstimes.com/breaking-news/money/story/asiasons-capital-sees-lapsed-share-placement-20131216
Asiasons Capital Group
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Asiasons Capital
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Asiasons Capital Group is an Alternative Asset Investment and Management Group focused on opportunities in South East Asia. The Group is listed on the Main Board of the Stock Exchange of Singapore and has a market capitalization of about SGD$930m as at May 2013.
Asiasons’ main investment activities are conducted through Dragonrider Opportunity Fund I and II via Asiasons Private Equity, the fund management unit of the Group. Fund I has a total fund size of US$100 million and currently records an IRR for the portfolio of 38% per annum, approximately 2.3 times of its initial cost of capital. Fund II targets a fund size of US$250m and is currently in the midst of its fund raising and has just completed a first close in end march 2012.
The investment strategy of Asiasons is geographically focused in South East Asia, while the sector focus is in Consumer and Resources. This strategy has been formulated based on the demographics trends in South East Asia namely increased consumer spending and urban migration in one of the most populous and youngest populations in the world.
Asiasons has a hands-on value creation proposition comprising not just expertise in Financial Structuring and Operational Enhancements but also has an in-house multi award winning team specializing in Branding, Design and New Economy strategies. These value added competencies together with the group’s regional footprint allows Asiasons to successfully expand its portfolio companies throughout the Asian region.
Asiasons’ investment activities are further complemented by its financial advisory and capital markets arm led by its subsidiary, Asiasons WFG Financial Ltd, a listed financial advisory house licensed by the Monetary Authority of Singapore which has been consistently ranked as one of the top boutique IPO managers in the region.
Some of the more high portfolio companies include Chaswood Resources , the region’s largest casual dining operators (operating T.G.I. Friday’s, Watami, Bulgogi Brothers, Paradise Dynasty and its 7 other developed brands) which is listed on SGX, the largest bereavement care operator in Asia operating under its brand name, Nirvana . Liongold, the largest listed Gold mining company in Singapore and most recently EMS Holdings (world’s leading exhibition company) and Hi-5, a popular multiple award-winning children programme.
http://asiasons.com/about/
Asiasons’ main investment activities are conducted through Dragonrider Opportunity Fund I and II via Asiasons Private Equity, the fund management unit of the Group. Fund I has a total fund size of US$100 million and currently records an IRR for the portfolio of 38% per annum, approximately 2.3 times of its initial cost of capital. Fund II targets a fund size of US$250m and is currently in the midst of its fund raising and has just completed a first close in end march 2012.
The investment strategy of Asiasons is geographically focused in South East Asia, while the sector focus is in Consumer and Resources. This strategy has been formulated based on the demographics trends in South East Asia namely increased consumer spending and urban migration in one of the most populous and youngest populations in the world.
Asiasons has a hands-on value creation proposition comprising not just expertise in Financial Structuring and Operational Enhancements but also has an in-house multi award winning team specializing in Branding, Design and New Economy strategies. These value added competencies together with the group’s regional footprint allows Asiasons to successfully expand its portfolio companies throughout the Asian region.
Asiasons’ investment activities are further complemented by its financial advisory and capital markets arm led by its subsidiary, Asiasons WFG Financial Ltd, a listed financial advisory house licensed by the Monetary Authority of Singapore which has been consistently ranked as one of the top boutique IPO managers in the region.
Some of the more high portfolio companies include Chaswood Resources , the region’s largest casual dining operators (operating T.G.I. Friday’s, Watami, Bulgogi Brothers, Paradise Dynasty and its 7 other developed brands) which is listed on SGX, the largest bereavement care operator in Asia operating under its brand name, Nirvana . Liongold, the largest listed Gold mining company in Singapore and most recently EMS Holdings (world’s leading exhibition company) and Hi-5, a popular multiple award-winning children programme.
http://asiasons.com/about/
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