Cover of this week's edition of The Edge.

BIG-NAME private-equity funds have bought stakes in China Animal Healthcare and China Fishery Group. That could be a harbinger of a broad re-rating of the S-chip sector, according to the current edition of The Edge Singapore.

Which S-chips will be next?

The Edge quoted Lui Yenli, director of corporate advisory at Stirling Coleman Capital, who brought Blackstone Group and China Animal Healthcare together,  as saying that there are more gems in the S-chip sector that are yet to be discovered by big-name investors.

And many are still “ridiculously” undervalued, said Lui.

The Edge report, written by seasoned journalist Leu Siew Ying, went on to talk about a few S-chips:

* China XLX Fertiliser: This company was approached by Blackstone with a proposal for a strategic investment last year but a deal didn’t materialize.

United Envirotech CEO Lin Yucheng. Photo by Leong Chan Teik
* United Envirotech: This player operates in the booming water treatment industry in China and it is planning to issue Taiwan Depositary Receipts to raise funds for its capital-intensive business.

The company welcomes cash injections by strategic investors but CEO Lin Yucheng says he will not sell at a discount. “If you look at our results and our plants, we are a different (company) now.”
The Edge cited anonymous sources saying that United Envirotech is holding talks with a Japanese-Australian investment group and a local infrastructure trust might be interested in buying its water plants.

* China Eratat: The Edge said that CFO Ken Ho confirmed that there have been more funds and analysts showing interest in the company since the beginning of the year.

“There are funds in China and Hong Kong that are asking if anyone wants to transfer a big block of shares at a discount or whether we are interested in doing a placement. The price is not right, so we turned down a number of proposals,” said Ken.

* Yangzijiang Shipbuilding: Officials at the shipbuilder said they are not looking for strategic investors. “We have a very big market capitalization. If they are interested in us, they can easily accumulate a sizeable stake in the market,” said CFO Liu Hua.

Instead, Yangzijiang would be interested in finding a partner that could help it expand its business, added Liu.

For the full 2-page report and more, go buy The Edge at the newsstands for S$3.80.


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