Gallant Venture transformed into fallen angel

How Gallant Venture had fallen. This listed company used to have a track record of making good profits and even counted Sembcorp Industries as one of its major shareholders. But in the aftermath of the Great Financial Crisis of 2009, Gallant Venture share price free fall from the sky to become a perennial penny stock. This counter would have been placed under SGX Watch List for failing to meet the Minimum Trading Price (MTP), if not for its $619 million market capitalization.

In the latest turn of events, investors of Gallant Venture should brace themselves for a roller coaster ride following the exit of Sembcorp Industries’ exit. On 11 June 2019, it was announced that Sembcorp Industries disposed its entire shareholdings in Gallant Venture and ceased to be a substantial shareholder.

Gallant Venture

Perhaps Sembcorp Industries had lost patience with Gallant Venture. For the past five years, revenue had declined from $2.33 billion in 2014 to $1.8 billion in 2018. Profits had become erratic and inconsistent as well. In 2014, full-year profit was $7.5 million while 2016 saw profit of $72 million. But in 2015, the Group suffered losses of $145 million. Subsequently, since 2017, Gallant Venture had been in the red.

With the exit of a strategic shareholder, the prospect for Gallant Venture appears to be grim. Whether the Group can recover from this setback remains to be seen. Inevitably, questions will be raised on whether management made the right call in venturing into automotive business in 2013. While the automotive business provides additional revenue source, this business segment comes with risks. Most importantly, the venture represents a massive change in business direction from its core businesses – operating business parks, utilities business, property development and resort business.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in this counter before. Whether Gallant Venture share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Gallant Venture should not have strayed?

For sure, the Great Financial Crisis of 2009 had been a water-shed event for companies. Gallant Venture was not spared from the crisis either as it suffered net loss of $10.5 million as compared to 2008’s net profit of $0.6 million. But subsequently, the Group bounced back impressively as it posted healthy levels of profits from 2010 to 2014.

Based on the past data, I am inclined to think that if Gallant Venture had stick to its core competency and not ventured into the automotive business, it would have avoided its current plight.

To be fair to the management, the automotive business (IMAS) had [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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