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Hong Leong Asia - CGS-CIMB Research 2021-08-30: Acquiring 20% Stake In BRC Asia

HONG LEONG ASIA LTD. (SGX:H22) | SGinvestors.io HONG LEONG ASIA LTD. (SGX:H22)

Hong Leong Asia - Acquiring 20% Stake In BRC Asia

  • Post a combination of new share placement and married deals, Hong Leong Asia will have a 20% stake in BRC Asia, becoming its 2nd largest shareholder.
  • We see synergistic collaboration in
    1. increased automation opportunities in PPVC building technology locally, and
    2. joint overseas expansion.
  • We estimate 8% FY22F EPS accretion for Hong Leong Asia should the deal materialise. Reiterate ADD and target price of S$1.05.



Hong Leong Asia to become BRC Asia’s 2nd largest shareholder

  • Post a combination of new share placement and married deals with 5 other existing shareholders, Hong Leong Asia (SGX:H22) will hold a 20% stake (3.6% stake previously) in BRC Asia (SGX:BEC), becoming its 2nd largest shareholder.
  • Subscription price of S$1.48/share is a 2.06% discount to Friday’s VWAP, with total new investment cost of S$68.1m. We estimate the deal values BRC Asia at ~9x CY22F P/E. Hong Leong Asia may request to nominate 2 seats to BRC Asia’s Board of Directors.
  • The proposed subscription will require BRC Asia’s EGM approval; Esteel Enterprise, the controlling shareholder of BRC Asia with a 69% stake currently, has undertaken to vote in favour of the resolution. The transaction is expected to close on 31 Dec 2021.

Room for synergistic collaboration both locally and abroad

  • We are positive on this deal to some 12.75% share dilution for BRC Asia.


Reiterate ADD and target price of S$1.05






ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-30
SGX Stock Analyst Report ADD MAINTAIN ADD 1.050 SAME 1.050



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