The Singapore Regulation (SGX RegCo) has issued a query to Mencast Holdings after the company’s shares closed 1.9 cents higher or 50% up at 5.7 cents on June 10.
Shares in the company climbed steadily before reaching an intra-day high of 5.7 cents. The share price was also among the highest since July 2021.
In the query, the market regulator noted the company’s “unusual volume movements” and asked it to confirm its compliance with the listing rules.
SGX RegCo had also asked Mencast to reveal any information that could possibly explain the trading.
Shares in Mencast were the second-most heavily traded on the Singapore Exchange (SGX) on June 10 with 56.3 million shares changed hands.
While the company has yet to issue an explanation, it did, on the same day, reveal that it would be disposing of its entire stake in its subsidiary Mencast Subsea for a consideration of $2.1 million.
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Mencast Subsea is the holding company of Unidive Offshore Private Limited and Unidive Marine Services (Malaysia) Sdn Bhd. Mencast Subsea and Unidive Malaysia are both mainly in the business of commercial diving, underwater repair and maintenance for ships, tankers and other ocean-going vessels. Unidive Singapore presently has no operations and is inactive
The purchasers of the stake in Mencast Subsea are Time Marine Engineering Pte. Ltd., who will be purchasing a 97% stake in Mencast Subsea, and Chen Rongxiang Jeremiah Charles, who will be purchasing the remaining 3% stake.
Chen is a manager with Mencast Subsea. The purchase was made in his personal capacity and for private investment purposes.
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According to Mencast, the sale companies have highly labour intensive business operations and “require a high degree of specialized skillset, especially in commercial diving, and accordingly higher staff costs”.
“Our group has been constantly monitoring its cost components in its endeavour to contain its cost structure, and staff cost is one such major component. The proposed disposal is expected to reduce the group’s headcount by approximately 14% which is in line with the group’s plan to reduce its reliance on intensive labour and resulting in a leaner cost structure,” reads the statement dated June 10.
In addition, the sale companies have not been generating revenue growth since FY2017, with revenue ranging from between $4.9 million to $6.1 million in the past five years.
“Our group does not expect an improvement in the operating environment of the sale companies, and is of the view that the current inflationary environment, tight labour market and increases in utilities and fuels will lead to higher running costs which is not sustainable by the current level of revenue of the sale companies,” says Mensea.
“The proposed disposal will allow the group to streamline its business structure, reduce its fixed operating costs and minimise and/or arrest future losses,” it adds. “The proposed disposal will also enable the group to free up its resources and capital for allocation to its other profitable operations and towards satisfying its debts.”
