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China Eastsea Business Software to delist from AIM, growth opportunities 'badly impaired'

China Eastsea Business Software (AIM: CESG) plans to delist from the AIM market of the London Stock Exchange, seeking shareholder approval to cancel admission and purchase ordinary shares by way of tender offer of 10 pence per share, compared to the stock’s current price of 6.50 pence.

The company said that the performance of the share price has been disappointing since its admission to trading on AIM even when the profits were exceeding market expectations, while the development of the business and the growth potential of the Chinese information technology and business process outsourcing services have not been adequately reflected in the value attributed to the shares.

Therefore, the board said that the London listing was not in the best interests of the company and the costs of remaining on AIM are “prohibitively high".

The company has traded at a loss in the first half of the current financial year, expecting to post profits for the full year, which, however, will be below the levels achieved before the economic downturn. The slow recovery is attributed to the slow pace of recovery in China Eastsea’s target segments, including the government sectors, which are lagging behind the recover in other parts of the Chinese economy.

Due to the delisting and failure to attract capital needs for development while listed, China Eastsea expects its ability to make the most of eventual recovery to be badly impaired.

Shares in the company rallied 30% on the announcement of the tender offer.

Disclosure: The author holds no positions in the company