Published December 17, 2008

Broadway shares take the hit for a second day

By LYNETTE KHOO

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BROADWAY Industrial Group shares took another severe beating yesterday in what dealers speculated could be forced selling of shares held by a senior executive to meet margin calls.

The usually illiquid stock plunged 14 cents, or 38.9 per cent, to a four-year low of 22 cents, with 1.45 million shares changing hands. On Monday, after being untraded for the past two weeks, the counter plummeted 21.5 cents, or 37.4 per cent, to 36 cents, with 441,000 units traded.

What prompted speculation of forced selling could be a filing with the Singapore Exchange yesterday that showed Broadway's executive chairman Wong Sheung Sze had on Monday transferred five million Broadway shares to Hong Leong Finance Nominees Pte Ltd. This trimmed his direct stake to 20.84 per cent from 23.26 per cent and raised his deemed stake to 15.58 per cent from 13.15 per cent.

Dealers said one possibility of the share transfer was to top up his account with HL Finance. And there could be a need to meet margin calls, which could have triggered a forced selling, they added. It is not known what trading account Mr Wong has with HL Finance and the purpose his shares were pledged for.

In a note last month, CIMB-GK maintained its 'neutral' rating on Broadway after its results for the third quarter ended Sept 30 came in below expectations.

Broadway's net profit for the third quarter slumped 58.1 per cent to $2.71 million, hurt by increased expenses arising from higher labour costs, finance expenses and foreign exchange losses.

Mainly driven by its acquisition of the remaining 44.15 per cent stake in Compart Asia Pte Ltd in the fourth quarter last year, it achieved a year-on-year growth of 20.8 per cent in profit from a year ago to $18.6 million for the first nine months this year.

CIMB-GK cited difficult times ahead given the prolonged downturn in the semiconductor industry and slower shipment growth at clients Seagate and Hitachi, and slashed its FY08-10 profit forecasts by 11-30 per cent.