Cogent Holdings Ltd - Phillip Securities 2016-02-02: M&A fever hotting up

Cogent Holdings Ltd - Phillip Securities 2016-02-02: M&A fever hotting up COGENT HOLDINGS LIMITED KJ9.SI 

Cogent Holdings Ltd - M&A fever hotting up 

  • An article published by The Wall Street Journal headlined a deal worth more than S$400mn for Cogent. We look at some scenario analysis of various price multiple valuations. 

What is the news? 

  • A recent article on 28 January by The Wall Street Journal (WSJ) headlined that Cogent Holdings Ltd (Cogent) "could be worth more than S$400mn". 
  • Cogent has since issued an announcement referring to the article. 

How do we view this? 


 A deal at S$400mn prices Cogent at 83.6 cents per share. 

  • There are currently 478.5mn ordinary shares outstanding for Cogent. If a deal were to be struck at S$400mn, this would imply Cogent is being priced at 83.6 cents per share. 
  • This represents a premium of 54.8% to our existing target price of 54 cents and an upside of 92% from the closing price. 

 What if Cogent were to be priced similar to APL Logistics' 15x EBITDA? 

  • The WSJ article quoted the sale of NOL's APL Logistics to Japanese firm Kintetsu World Express Inc, as a recent merger-and-acquisition (M&A) in the logistics industry. 
  • Based on our FY15e EBITDA estimate of S$39.2mn, it would price Cogent at S$588mn, or S$1.229 per share – a premium of 128% over our existing target price of 54 cents. 

 Deal seems more likely to be priced closer to precedent logistics M&A transactions' EV/EBITDA trailing multiple. 

  • If pegged to 9.6x trailing EV/EBITDA, and using our estimate of trailing FY14 EBITDA of S$30.6mn, this would price the deal at S$226.9mn instead – far lower than the S$400mn that is suggested. 
  • This implies a price of 47.4 cents per share, which is a discount of 12% to our existing target price of 54 cents, but an upside of 9% from the closing price. 
  • A deal at S$400mn would price Cogent at 15.3x trailing EV/EBITDA – far higher than the multiples compared in the divestment of APL Logistics.

Investment Actions 

  • We continue to view Cogent favourably. Notwithstanding the possibility of the deal, our target price of S$0.540 remains unchanged. Re-iterate BUY.



Richard Leow CFTe Phillip Securities | http://www.poems.com.sg/ 2016-02-02
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 0.54 Same 0.54


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