ECON Healthcare (Asia), which posted a material loss on trades in shares in Hong Kong-listed Crosstec Group, said Executive Chairman and Group CEO Ong Chu Poh also acquired Crosstec shares prior to the company’s purchases, according to a filing to SGX Friday.
Ong, who is also a controlling shareholder of the company, had acquired a total of 2.7 million Crosstec shares between 24 November 2021 and 7 January 2022, and he then sold them on 7 January, before acquiring another 1.7 million shares on the same day, and then selling them on 13 January, the nursing home operator said in response to queries from SGX.
Ong’s holding in Crosstec was less than 5 percent, and apart from his holding in ECON Healthcare, he didn’t have any interest in the company’s acquisition and subsequent disposal of its Crosstec shares, the filing said. Ong also has no relationship with Crosstec, its directors or controlling shareholders, the filing said.
The filing said Crosstec was recommended to Ong as an investment by an individual claiming to be Chan Yan Chong, an academic and stock commentator who was previously acquainted with Ong.
“After being made aware of this potential investment and after the company considered publicly available information on Crosstec, including information on Crosstec available on the website of the HKEx such as its annual report and financial statements, a decision was made by Mr. Ong to invest in Crosstec shares,” the company said.
ECON Healthcare said the Crosstec investment was in line with its investment policy, which allows purchases of equity securities traded on reputable stock exchanges.
“The due diligence was primarily based on consideration of publicly available information on Crosstec,” the filing said.
Buy high, sell low
ECON Healthcare’s liquidation of its stake in Crosstec, a Hong Kong-listed interior design player, came not long after the shares were acquired.
On 30 December, the company acquired 6.8 million Crosstec shares for around S$1.99 million, and on 6 January, the company acquired another 5 million shares for around S$2.0 million, for a total investment of around S$3.99 million, ECON Healthcare has previously said.
On 12 January, ECON Healthcare sold the shares for an estimated loss of around S$3.4 million, the company said Thursday. That compared with net profit for the 12 months ended 31 March 2021 of S$5.7 million.
Shares of Crosstec had plunged from as high as HK$2.65, touched on Monday, to close at HK$0.193 on Thursday. Crosstec told HKEx it wasn’t aware of any reason for the plunge.
The Crosstec deals weren’t ECON Healthcare’s first foray into listed investments. On 11 November 2021, the company acquired 14,000 shares of UOB and 23,000 shares of DBS, and sold all of those shares on 6 January, the filing said.
Closing the barn door
ECON Healthcare’s audit committee (AC) said the investment mandate and policy, and the related controls and safeguards would need to be reviewed.
“The AC will imminently be undertaking such review, including engaging external professional advisers to assist with the review,” the filing said.
The AC is seeking changes including improved due diligence on targeted securities, lower maximum investment limits, including limits by asset class and daily trading limits, and imposing requirements on asset mix and diversification, the filing said. “The board will imminently be undertaking a review of the composition of the investment committee (IC), including appointing a third member to the IC.”
Ong is the chairman of the IC, the filing said.
The policy for the IC is it include at least three people, including the committee chairman, the group chief financial officer, and other members chosen by the nominating committee periodically, the filing said.
In November 2021, the company’s board gave Ong authority to invest S$1.2 million in quoted securities, and in December, it approved S$4.2 million, the filing said.
ECON Healthcare operates 11 medicare centers and nursing homes in Singapore, Malaysia and China.
In January 2020, the company was appointed an operator for two new nursing homes, the ECON Medicare Centre and Nursing Home – Henderson, expected to be operational in the second half of this year, and the ECON Medicare Centre and Nursing Home – Jurong East, which is expected to be operational in 2025, according to the company’s website.