SGX Singapore News Update : Epic Research Singapore

54 Mainboard Stocks with Share Consolidation Plans Averaged 12% Gain in April

Since January, 54 companies have announced share consolidation intentions following the announcement of the Minimum Trading Price (MTP) initiative.

The 54 stocks generated an average 12.4% price gain in April, bringing their year-to-date gains to 4.5%.

The largest sectors represented by the 54 companies were Industrials and Information Technology, which both have 12 stocks each.

A Minimum Trading Price (MTP) can reduce share price volatility. Based on standard price steps, the minimum move for a 1 cent stock is currently 0.1 cents – i.e. as much as 10%. The minimum move for a $1.00 stock, on the other hand, is 0.5% – that means the minimum move is 20 times more for the 1 cent stock in terms of the value of the investment.

Moreover, stocks in Singapore come with different prices and price alone does not provide an indication of the underlying business. Since the MTP initiative was announced, 54 stocks have announced intentions to consolidate their shares

Share consolidation reduces the number of shares outstanding while increasing the value of the stock, thereby maintaining its market value. For instance, by reducing the number of shares on issue tenfold, we would expect to see the stock price rise 10 times, all other things remaining equal. This would see the price increasing to 50 cents. Hence, a 1% upward adjustment in the value of the assets could effectively be reflected by a price move from 50 cents to 50 ½ cents.

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