Innovalues - Maybank Kim Eng 2016-04-08: In The Sellers’ Market

Innovalues - Maybank Kim Eng 2016-04-08: In The Sellers’ Market INNOVALUES LIMITED 591.SI 

Innovalues (IP SP) - In The Sellers’ Market 

Review discussions likely to be well-advanced 

  • Innovalues’ announcement of its appointment of Rippledot likely means the strategic review is already well-advanced, as it was made only after a strong stock rally. 
  • An offer is not guaranteed but Innovalues is a highly-desired company that should not be sold cheap. 
  • Rippledot is also a canny advisor that has advised on many successful deals, including competitive bids. 
  • We have a BUY with a SGD1.00 target price but would not be surprised if this is exceeded in a competitive bidding situation. 

Rippledot to look for options that unlock value 

  • Innovalues announced that they appointed Rippledot Capital Advisers to "review the strategic options available… with a view to enhancing and unlocking shareholder value". 
  • We think this announcement was made in response to the stock’s earlier spike above its previous peak. As such, it is likely the process is already quite advanced, and they may have been holding discussions with potential buyers for some time now. The process could be close to concluding. 

Desirability highlighted by other high-profile M&As 

  • Whether or not there will be an offer cannot be predicted. But two recent M&As in the Asian automotive space — IPE in HK and Interplex in Singapore — have highlighted Innovalues as a leading M&A candidate. 
  • We noted in our Feb report that Innovalues’s financial and operating metrics are far better than the other two companies. 
  • We also noted that Baring Private Equity, which is privatising Interplex, could potentially bid for Innovalues at SGD1.20, merge them and still pay the same valuation it is already prepared to pay for Interplex. 

Backed by well-regarded M&A advisor 

  • Rippledot is well regarded as a corporate advisor. They have done many successful privatisations in the past that involve Singapore companies such as Unisteel, MMI, First Engineering, Seksun and Goodpack, including competitive bidding situations. 
  • Their connections to private equity funds are likely to be superb, and it has had a good track record in closing deals. Past M&A deals advised by Rippledot can be found here.

Gregory Yap CFA Maybank Kim Eng | 2016-04-08
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 1.00 Same 1.00