Excerpts from UOB Kay Hian report
• Maintain BUY with upward potential in target price due to M&As. While the upside is less than 10%, we see potential M&A interest driving share price further.
In Dec 15 alone, we saw two precision engineering-related takeover deals in the region. IPE Group in Hong Kong was acquired at a trailing PE of 17.4x.
This multiple would imply a fair value in excess of S$1.20 for Innovalues’ trailing 12-month PE ratio. Innovalues’ 2015 favourable net cash position, free cash flow-generating capabilities, strong management team and potential cost-cutting measures make for a prime leveraged buyout target, in our view.
Target price of S$1.06 is based on DCF methodology (COE: 10%, terminal growth: 0%).
|♦ CHINA AVIATION OIL|
• Five-year plan to double profits through organic growth and M&A acquisitions. Management has shared its aim of doubling profits to US$120m by 2020 through both organic growth (as it establishes itself overseas in Europe and the US) and M&As.
Full report here.