CIMB: 18 potential privatisation candidates

Excerpts from CIMB's excellent 12-page report dated Aug 29 and titled "Catching the privatisation wave".

CIMB analyst Kenneth Ng's picks for potential privatisation.

Analyst: Kenneth Ng, CFA

Ren Yuanlin, executive chairman, Yangzijiang Shipbuilding. NextInsight file photo

In the Capital Goods sector, Chemoil, CH Offshore, Hiap Seng, KS Energy, Yangzijiang have major shareholders with the capacity to privatise them, we think.

Chemoil, CH Offshore and KS Energy appear to be the most likely candidates.

STX OSV is available for sale. Mermaid Maritime and Otto Marine have not been doing well but with stocks trading at large discounts to NAV at 0.4x-0.6x P/BV, privatisation can be a long shot.

In the Commodities space, although Noble, Olam and Wilmar have consistently popped out in our quantitative screens, we think the size of the companies, their heavy working-capital requirements and the benefits of branding from a listing, reduce the likelihood of any privatisation offers.

Instead, we think a more likely candidate is Mewah, where the family owns 76% and the stock is struggling.

Among Property and Financials, a privatisation offer for Bukit Sembawang is the most likely with the stock trading at a 47% discount to RNAV and the controlling Lee family getting some proceeds from the F&N/APB saga.

Similarly, with OCBC making gains of S$1.15bn, the likelihood of a third privatisation offer for Great Eastern Holdings is high as well.

Pan Pacific is the other stock that could be folded into UOL.

Ho Bee and Singapore Land are the other candidates that could possibly be made offers.

In the other sectors, likely takeover candidates are M1, Armstrong and Biosensors.

M1 could be potentially taken over since its biggest shareholder, Axiata, typically likes to hold subsidiary stakes while the other shareholders do not see M1 as a core holding and could count as willing sellers.

Armstrong, a components manufacturer, has been exploring privatisation options for some time or a complete sell-out.

Biosensor’s parent, Shandong Weigao, could yet absorb the whole Biosensor as one of its various medical-company subsidiaries.

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Comments

#6 CT 2012-09-02 16:31

The recent privatisation announcements -- I didn't read anyone predicting them. Such as LMA, Superior Multi-Packaging , Hersing, Cerebos, k1 Ventures, Juken .....

#5 awong 2012-09-01 06:22

Problem with S-chips is that rationally, many of the owners showld take them private since cash in listco is more than market cap. But like HongXing, it never did happen and that was a red flag cos eventually we all found out that the cash was not quite there.

#4 Nineoclock 2012-09-01 05:41

All the analysis in the world lacks 1 thing -- you cannot read the mind of the majority shareholder. You can't tell for sure. Even when the analysis is near perfect, the majority shareholder could plainly refuse to privatise -- for intangible reasons such as status from a listing, etc. etc. There is a lot more that goes on behind the numbers.

#3 Edna 2012-08-30 17:04

CIMB didn't include S-chips in its analysis. I think quite a no. would meet CIMB's criteria such as high majority ownership.

A big bunch of them even has stock prices which are lower than the net cash in the business! Like China Fibretech. Fujian Zhenyun.

Might as well privatise ! Will it happen soon?

#2 Kit Whye 2012-08-30 11:14

Armstrong - Delisted once, listed again. Now want to privatise again? Unless Ong Peng Koon needs money, of course.

#1 Kit Whye 2012-08-30 11:13

Pan Pacific - good chance as Chairman Wee would want his daughter to have full control and avoid all the SGX regulatory requirements of a listed company. To take Pan Pacific private for $146M is no issue for the Wee's family.

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CIMB: 18 potential privatisation candidates

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