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.

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.

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.

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.

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.

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