Sunningdale Tech - CGS-CIMB Research 2020-11-09: Privatisation Offer Overshadows Results

SUNNINGDALE TECH LTD (SGX:BHQ) | SGinvestors.io SUNNINGDALE TECH LTD (SGX:BHQ)

Sunningdale Tech - Privatisation Offer Overshadows Results

  • Sunningdale Tech's 9M20 core net profit was above expectations, at 133%/119% of our and consensus full-year forecasts.
  • Sunningdale Tech received a privatisation offer of either S$1.55 in cash or unlisted shares of the holding company of the offeror.
  • We expect Sunningdale's share price (S$1.68 on 9 Nov) to fall when trading resumes tomorrow.



Sunningdale Tech's 9M20 core net profit above expectations

  • Sunningdale Tech (SGX:BHQ)'s 9M20 revenue was better than expected as customer demand increased q-o-q. 9M20 core net profit was a strong beat at 133%/119% of our and consensus full-year expectations. This was mainly due to tight cost control and product mix changes. Gross profit margin in 3Q20 was 14.8% (vs. 12.5% in 3Q19).





Receives a privatisation offer

  • Sunrise Technology Investment Pte Ltd (offeror) had proposed a privatisation of Sunningdale via a Scheme of Arrangement. The offer price is S$1.55 in cash or the equivalent in unlisted shares of the holding company (hold co) of the offeror.
  • The hold co’s major shareholders are Mr Koh Boon Hwee, non-executve chairman and a major shareholder of Sunningdale Tech, and private equity fund Novo Tellus. Controlling shareholders will jointly work towards achieving a liquidity event (including but not limited to an initial public offering or a trade sale) within a five-year time frame. Shareholders with an 18.14% stake in Sunningdale Tech have undertaken to vote in favour of the privatisation. See Sunningdale Tech Announcements.


Offer price is below asset value

  • Based on our forecasts, the offer price of S$1.55 translates into a FY20F P/BV of 0.78x and P/E of 16.7x.
  • In May 2019, Sunningdale Tech’s SGX then-listed peer Memtech International received a buy-out offer valuing the company at 1.1x FY19 P/BV and 12.6x P/E.

Reiterate HOLD. Target Price raised to S$1.55






William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-09
SGX Stock Analyst Report ADD MAINTAIN ADD 1.55 UP 1.160



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