NINE underperforming companies have been told to buck up or risk getting booted off the Singapore Exchange (SGX).

The nine have been placed on a watch-list - a new SGX initiative designed to improve the quality of public companies and boost shareholder confidence.

They were singled out for racking up pre-tax losses for the three most recently completed consecutive financial years, excluding exceptional or non-recurrent income and extraordinary items.

And their average daily market capitalisation has averaged less than $40 million over the last 120 market days, excluding days with trading halts or suspensions.

They will have to provide quarterly updates on their financial situation, including their future directions and 'any other material developments' that could have a significant impact.

The companies - they include Stratech Systems, Tri-M Technologies and Unified Communications Holdings - have two years to lift their game or risk being delisted.

'This gives investors some time to review whether they should give up their ownership in these companies. At least they'll have some time to react and run away should they need to,' said Sias Research investment analyst Alan Lok.

'In essence, it is a good move. If these problems drag on and on and eventually the company goes bankrupt, shareholders won't get even a cent, which is worse.'

Getting on the watch-list could also make these companies easy targets of vulture funds.

'It's a free advertisement to private equity firms or distressed security hedge funds, which may decide to buy out some of these companies in distress,' said Mr Lok.

The watch-list initiative, announced by the SGX last November, is also aimed at enhancing the reputation of the local bourse operator, said an industry source.

'If too many firms are in the red for too long, this will not give people a very good impression. In the minds of global investors, the Singapore stock market is already being viewed as the backyard of Hong Kong's,' he said.

More companies could find themselves on the watch-list in the next quarter, when the next review is being conducted.

Filings to the SGX show that Compact Metal Industries, for example, issued a warning that it has incurred pre-tax losses for the three most recently completed consecutive financial years. Its market cap of $88.6 million kept it out of the watch-list but it is getting near the danger zone.

'SGX is a bit lenient at the moment. The nine companies serve as a warning bell to others to get their act together,' said the industry source.

Trading in companies on the watch-list will go on as normal.

yanghw@sph.com.sg

Monitored

THE nine mainboard- listed companies that the Singapore Exchange has placed on its watch-list are:

ASA Group Holdings

Chuan Soon Huat Industrial Group

Fastech Synergy

General Magnetics

Ionics EMS

Joinn Holdings

Stratech Systems

Tri-M Technologies

Unified Communications Holdings