Why Singtel Optus is Leaving the ASX

At 6:27 on Tuesday, Singtel Optus [ASX:SGT] announced it was seeking delisting from the ASX. It expects to suspend trading in late May and officially delist in early June.

Singtel was listed in September 2001. Since then, their price has grown by over 120%.

Optus ASX Google

Source: Google Finance
[Click to enlarge]

So you may be surprised to read that Singtel thinks ‘there are minimal shareholder benefits from maintaining Singtel’s listing on the ASX’.

What’s making them leave

Interests in Singtel are traded on the ASX as CDIs. CDIs are different to shares because they confer a beneficiary interest (right to dividends, etc.) instead of a legal title. Other than that, they’re bought and sold on the Exchange pretty much the same way.

Singtel have cited low trading volumes as their main reason for quitting the ASX. As mentioned above, they think this will be bad for shareholders. This is because low trading volumes mean it’s harder for shareholders to get in and out of owning SGT CDIs. If they can’t easily buy and sell shares, then the only benefit to them is waiting for dividend payouts.

They also noted that delisting would save them money. This is because they’re currently also listed on the Singapore Stock Exchange (SGX). Having a dual listing costs them a lot in admin and legal compliance.

What could happen to Optus in Australia

Singtel has stated delisting won’t affect Optus in Australia. They said:

Singtel’s business and operations in Australia will not be affected by the proposed delisting. Since its acquisition of (…) Optus, Singtel has invested over AU$13 billion in building infrastructure and improving communication services in Australia. There will be no change in Singtel’s business strategy as it remains committed to growing and investing in its Australian business’.

The main change for you is that it’ll be harder to get a piece of that action. When Optus grows and profits, that cash will go to Singapore. Dividends will be paid to those who’ve bought Singtel shares through the Singapore exchange [SGX:Z74]. According to the SGX Rulebook, foreign investors must go through a portal dealer to buy and sell shares. They can charge very high commission rates, even when you place the order online.

The good news is, if you’ve already got Singtel shares, you can keep them — sort of. Singtel is arranging to let you convert them to SGX shares on a 1:1 basis. If you’d rather not, you can sell them now, or after June 9 when the voluntary sale facility opens.

ASX update Optus

Source: ASX
[Click to enlarge]

At the time of writing, Singtel shares on the ASX were trading down 1.43% to $4.15. The Singapore dual listing was down 2.04% to SGD$4.32.

Eva Mellors,
Contributor, Money Morning

PS: Are you one of those people that do hold on to stocks for the dividends? Then you’ll love our editors’ report on dividend income. It’s full of handy tips on dividend stock selection and more. Click here to find out how to claim your free copy.

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