"M&A deals that could happen -- CWT, Biosensors, SunVic, CH Offshore, etc"

Excerpts from CIMB report

Analysts: Kenneth Ng, CFA (left) & The Singapore Research Team

For privatisation candidates in Singapore, the areas to look for would be the downtrodden sectors of property, transport and commodities.

CWT has doubled its earnings in the past two years but because the earnings come from ‘difficult-to-predict’ commodities businesses, investors have not accorded the stock the same type of valuations for its old business.

CWT has gravitated to 1.2x P/BV. The Loi family owns 54% of the company and already has a vehicle in Cache Logisitics to recycle assets and recover capital if needed; there might not be a need to keep CWT listed if it falls below 1.0x P/BV.

We think that there may also be deals in the shipyards and transport infrastructure space. ASL Marine and CH Offshore trade at 1x P/BV or below and could go the way of Jaya.

Dyna-Mac is a main subcontractor for Keppel Corp and could be taken private by the latter since there is no clear successor.

Tiger Airways could be taken private by SIA and combined with Scoot to be a single budget brand for SIA.

Outside these sectors, Biosensors has a big cash pool to attract PE funds to come for a break-up deal. Sunvic Chemicals trades at a deep discount to asset values.

M&A deals that can happen next:

Takeover target	Acquirer	Why
CWT	Loi family	> Earnings have doubled in the past two years but share price has not reacted the same way as investors pay a much lower multiple on the unpredictable metal business. Stock trades at 1.2x P/BV, privatisation more likely if stock breaks below 1x P/BV. > The Loi family owns 54% of the company. With Cache Logistics listed, the family has a vehicle to get back capital (by moving warehouse assets from CWT to Cache) if they want.
Biosensors	CITIC PE	> To enrich its 21% stake in the company. > BIG is the only player with new stents coming out in the global market in the next 2 years, yet its valuation is the lowest among Asian and global peers. > With US$500m in the company, it can attract private equity guys to privatise and upstream the cash hoard.
SunVic Chemical	Sun Liping (owner)	> Post-transaction, NTA is estimated at S$1.50. Stock is trading at S$0.63 now. > Disposal gains (Rmb1.9bn) alone are about 120% of SVC’s current market cap. > No non-competing clause in place, meaning it can rebuild capacity cheaply using its new-found wealth and some leverage. A cheaper option is to start the rebuilding when volatile AA and AE prices come down in the distant future. Re-listing the company on other bourses in the future.
CH Offshore	Falcon Energy	> Trading at 1x P/BV. Majority of the assets are AHTS. > Owners are Falcon Energy (29%) and Peh Kwee Chim (24%). Falcon does not rule out privatisation. Its entry price (S$0.70) is 70% higher than current price. > No asset overlap and earnings accretive. Falcon owns mostly barges and CH Offshore's AHTS are complementary.
Dyna-mac	Keppel Corp & Desmond Lim (chairman)	> Might be privatised by Keppel Corp since it is the main subcontractor for Keppel for FPSO jobs. > Listed at 2.8x P/BV but has languished at 2x P/BV. > No succession plan from the Lim family to take over management.
		Source: CIMB, Company

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