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Takeover Could Drive Re-rating Of Deep-Value SmallCap Manufacturing Stocks
The takeover offer of PCI on 4 Jan 19 at an attractive premium and TTM EV/EBITDA of 5.5x could lead to a re-rating of deep-value manufacturing stocks. We re-iterate BUY on deep-value manufacturing names trading at below-industry EV/EBITDA backed by high cash balances and stocks offering high dividend yields. Our top picks are Fu Yu (2019F EV/EBITDA of 2.9x and yield of 8.7%) and Valuetronics (2019F EV/EBITDA of 2.7x and yield of 6.3%). Assuming 5.5x EV/EBITDA, both stocks could offer about 80% upside.
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Handshake or cold stare? • STI rangebound at 2960-3190 pending outcome of US-China trade talks • Adding a Bull-case scenario of STI at 3500 • Transiting to mid-contraction phase - SembCorp Industries, Netlink • S-REITs still in favour as FED turns dovish - CMT, MCT, MLT, FLT MAGIC • Sticking to defensives - ST Engineering, Yangzijiang, ComfortDelgro, CMT, MLT, Netlink Trust, UOB
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Check out our compilation of Target Prices