Innovalues (IP SP) - UOB Kay Hian 2016-10-27: Northstar Proposes Acquisition Of Innovalues

Innovalues (IP SP) - UOB Kay Hian 2016-10-27: Northstar Proposes Acquisition Of Innovalues INNOVALUES LIMITED 591.SI

Innovalues (IP SP) - Northstar Proposes Acquisition Of Innovalues

  • Since our initiation in Feb 16 at S$0.805, the stock has returned 22.4%. 
  • Precision Solutions, an indirect wholly-owned subsidiary of Northstar Equity Partners IV, proposed a share scheme for all shareholders of Innovalues
  • The offer values the company at S$331.4m, based on an offer price of S$1.01/share. 
  • We recommend shareholders ACCEPT THE OFFER as we expect global growth headwinds going into 2017 and valuations are in line with our target price of S$1.01.


Northstar proposed acquisition of all ordinary shares in the capital of Innovalues.

  • Northstar is a Singapore based private equity firm managing more than US$2b in committed capital dedicated to Southeast Asia. Northstar’s portfolio investments come from a variety of sectors which include banking, insurance, retail, oil and gas, coal and mining services, technology and telecommunications. Through its wholly-owned subsidiary Precision Solutions Limited, they have proposed to acquire Innovalues’ shares at: 
    1. S$1.01 per share in cash, or 
    2. one share of Precision Solutions Group and S$0.61 in cash per Innovalues share, subject to a limit of 65m Innovalues shares that may be elected for option. 
  • The shares in Precision Solutions Group will not be in a active market. 

Accept the offer. 

  • Precision Solutions’ rationale for the acquisition of Innovalues represents an opportunity for the company to acquire control of a company in the precision manufacturing space with a regional manufacturing footprint. 
  • The offer price of S$1.01 represents a premium of 30.5% to the 12-month VWAP (from 6 Apr 15 to 6 Apr 16) of Innovalues’ shares. 
  • The offer is at a 4.7% discount to our DCF-based target price of S$1.06 which we deem as fair given the challenging economic outlook for 2017 and global uncertainty stemming from a Brexit, US election, and a fresh layer of ASEAN uncertainty from a divided foreign policy between the Philippines and the rest of the ASEAN countries.

Some approvals still necessary. 

  • Northstar has received irrevocable undertakings from Mr Goh Leng Tse, Mr Pung Tong Seng, Mr Ong Tiak Beng and Mr Koh Boon Hwee who collectively own about 39% of the total shares in Innovalues to vote in favour of the scheme. The scheme will require 75% of all of Innovalues shareholders to vote in favour of the offer.


Innovalues 3Q16 results. 

  • Core net profit rose 55.8% yoy on continued gross margin expansion as the group’s automotive (AU) segment contribution continued to grow. 
  • The AU segment contributed about 77.7% and 79.7% of total revenue for 3Q16 and 9M16 vs 77.3% and 78.0% for 3Q15 and 9M16 respectively.


  • No change to our earnings estimates. We project a 3-year EPS CAGR of 11.5%.


  • We recommend shareholders ACCEPT THE OFFER.


  • Improved offers from other parties interested in acquiring Innovalues.

Nicholas Leow UOB Kay Hian | Andrew Chow CFA UOB Kay Hian | 2016-10-27
UOB Kay Hian SGX Stock Analyst Report ACCEPT OFFER Maintain BUY 1.06 Same 1.060