Singapore Strategy - UOB Kay Hian 2016-11-09: Riding The M&A Wave

Singapore Strategy - 2016-11-09: Riding The M&A Wave Singapore Strategy

Singapore Strategy - Riding The M&A Wave

  • M&A continues to be in play after the spate of privatisation. Other than privatisation candidates, we highlight companies with potential accretive acquisitions that could pique investors’ interest.


  • M&A theme continues to be in play. The recent spate of M&As, including the latest privatisation of ARA Asset Management, conditional general offer for Super Group and the acquisition of Innovalues via a scheme of arrangement, indicates the M&A theme is still playing out. 
  • This report highlights our stock picks to ride on the M&A theme.


Active M&A in Singapore. 

  • Year-to-date, there are more than 20 privatisation/de-listings in Singapore, at an average 26% premium to the last traded prices and transactions were done at an average P/NTA of 1.6x. 
  • With ample liquidity and undemanding valuations in selected cases, we believe M&A could continue to play out as we approach the year-end.

Avenues for M&A. 

  • In our view, there are several angles for M&A. This could include accretive acquisitions and privatisation/acquisition targets.

Accretive acquisition. 

  • In this category, we see upside in the likes of Singapore O&G, Cityneon, Duty Free International (DFI) and China Aviation Oil (CAO) in the mid-cap space. 
  • In the large-cap space, the usual suspects will be S-REITs, including Ascott Residence Trust (ART), Frasers Centrepoint Trust (FCT) and Frasers Logistics Trust (FLT). Of these three, FCT is expected to make the most significant acquisition as a proportion of its total assets. A potential acquisition by FCT is Waterway Point at Punggol.
  • In the mid-cap arena, we believe Cityneon and DFI could consider accretive M&A to further boost earnings. 
  • For Cityneon, we see potential acquisitions of new intellectual property rights (IPs) to broaden the group’s exposure to immersive exhibitions to build on its global presence. 
  • For DFI, we see its partnership with Heinemann providing the group the expertise as well as procurement power to consider expanding its presence in Malaysia as well as in the region. DFI’s balance sheet is also strong, with a net cash of RM178m (or 12% of current market capitalisation). 
  • Similarly, Singapore O&G is also a candidate for accretive acquisitions as the group is in a net cash position (S$19.9m or 8.4 cents/share) and the healthcare sector is an active arena for accretive acquisitions.

Privatisation or acquisition candidates. 

  • Investors’ interest in potential privatisation and acquisition targets has been heightened by the recent privatisation of ARA Asset Management, conditional general offer for Super as well as the acquisition of Innovalues through a scheme of arrangement.
  • Screening for deeply undervalued stocks or stocks in which substantial shareholders could “review strategic options”, we see potential M&A interest in United Engineers, Wheelock, Guocoland, Ho Bee, KSH, Mermaid Maritime and Vard.

Andrew Chow CFA UOB Kay Hian | Singapore Research Team UOB Kay Hian | 2016-11-09