Excerpts from UOB Kay Hian report


Share price: 
98 c

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.

check1.16Quality control: Visual inspection of all products to ensure they are in accordance with customers’ requirementsThis 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
Share price: 

• 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.

They intend to deploy their war chest of US$228m (S$319m) in net cash (around 35.6% of market cap) to acquire more synergistic fuel-related assets.

Maintain BUY with S$1.56 target price based on a DCF model (using 9.5% WACC and 0% terminal growth) with 50.7% upside to current price levels. The target price implies a reasonable 2017F PE of 12.0x and P/B of 1.4x.


Full report here.