The Singapore Exchange (SGX) has officially changed the rules of the game. As of October 2025, the Financial Watch Listāthat badge of shame slapped on companies with three consecutive years of losses and low market capsāis history.
On paper, this move towards a āmarket-driven regimeā sounds modern. It aligns us with global standards where the market, not the regulator, decides who lives and who dies. But for the retail investor, the uncle managing his own CPF, or the retiree hunting for yield, the removal of the Watch List removes a giant, flashing āDANGERā sign.
The risk factors havenāt disappearedājust the label. The āZombiesā are still walking among us, but now they donāt wear a warning tag.
If you are holding small-cap Singaporean equities, you need to become your own regulator. Today, we are going to look at the history of the Watch List to understand who survived, who failed, and how you can spot the difference before your capital evaporates.
If youāre new here, welcome. Iām Iggy, your Singapore-based market analyst. Since October 2025, weāve produced over 1,300 videos and 400 articles with 1.1 million watch hours. We are also home to a growing community of over 60 YouTube Premium subscribers and 30 paid Substack members.
Quick Housekeeping: If you want the best value, the YouTube Premium Membership (S$9/mth) bundles these deep-dive articles with the podcast videos. Substack alone is US$6, so the bundle is the āsmart moneyā move. Now, letās get to the numbers.
The Graveyard and The Graduates
To understand the future, we have to look at the past. Under the old regime, companies were placed on the Watch List if they recorded pre-tax losses for the three most recent completed financial years and had an average daily market cap of less than S$40 million.
They were given a deadline (usually 36 months) to shape up or ship out (delist).
Most failed. Companies like Dragon Group and CNA Group were delisted, leaving shareholders with pennies on the dollar or totally illiquid scrip. But a rare few managed to āgraduateā and return to profitability.
The difference between the survivors and the failures wasnāt luck. It was a specific operational behavior.
The āSurvival of the Fittestā Data
Iggyās Insight: The āGrowthā Trap
Here is the pattern nobody talks about: The companies that failed (Dragon, CNA) often tried to grow their way out of trouble. They announced new projects, expansions, or āstrategic pivotsā while their core cash flow was negative.
The companies that survived (Avi-Tech, S i2i) did the opposite. They shrank. They accepted they were smaller companies. They sold assets. They fired people. They acted like Steve Jobs returning to Apple in 1997āslashing 70% of the product line to save the ship. In a turnaround play, boring is bullish.
The New Reality: How to Spot a āZombieā Without the Label
Now that SGX wonāt tell you who is on the Watch List, you have to calculate it yourself. The dynamics that created the list are still present.
1. The āThree Strikesā Rule Still Applies
Just because the rulebook changed doesnāt mean the math did. If a company has posted three consecutive years of losses, they are statistically likely to face a liquidity crunch or a dilutive rights issue.
You must check the Income Statement manually. Do not rely on āAdjusted EBITDAā or āPro Formaā numbers. Look at Net Profit Attributable to Shareholders. If itās red for 3 years, stay away unless you see a massive change in management.
2. Cash Preservation vs. Revenue Growth
When analyzing a distressed small-cap, ignore the Revenue line. Look at the Cash Flow from Operations (CFO).
The Survivor Signal: Revenue is dropping, but Cash Flow is turning positive. This means they are cutting unprofitable contracts.
The Zombie Signal: Revenue is flat or rising, but Cash Flow is deeply negative. This means they are ābuying revenueā at a loss to keep up appearances.
Iggyās Take: Governance is the First Indicator
When a company is in trouble, I look at the Board of Directors.
If the company is bleeding cash and the Board is still comprised of the founderās family and friends who have been there for 10 years, the company will likely die. They are too emotionally attached to cut the cancer.
You want to see āThe Butcher.ā A new CEO or CFO appointed specifically to restructure. You want to see consolidation signals. If they are announcing a āGrand Expansion into AIā while they canāt pay their current bills, run.
Data Check: Valuing a Turnaround (Avi-Tech Example)
Letās look at Avi-Tech as the prime example of a āGraduate.ā They were on the brink, they fixed the business, and they survived. But what does the smart money see in a āboringā company like this today?
I donāt just guess at valuations. I check the institutional models to see if the recovery is priced in.
Source: InvestingPro (Data as of Dec 2025). Premium members can use code INVESTINGIGUANA for up to 50% off.
The Data Verdict:
Look at that Health Score. Itās an overall 2/5 (āFairā), which scares off the growth investors. But look closer at the sub-scores: the Cash Flow Health is a 4/5.
This confirms my thesis perfectly. A survivor doesnāt need āGrowth Healthā (which is a weak 2 here); it needs cash. The model also flags that Avi-Tech āHolds more cash than debtā and has āmaintained dividend payments for 11 consecutive years.ā That is the definition of a Watch List Graduate.
The institutional models currently calculate a Fair Value of S$0.27, implying a 33.8% Upside from the current S$0.20 level. This isnāt a āto the moonā play; itās a mispricing of safety.
The Investorās Playbook: Navigating the Post-Watch List Era
The removal of the Watch List is not a signal to take more risk. It is a signal that you must be more vigilant. Here is your action plan for the week:
