Excerpts from CIMB report....

Analyst: Jonathan Ng

Source: CIMB report, June16, on possible privatisation candidates

Pertama Holdings announced that Harvey Norman Singapore (HNS) has presented to its Board of Directors to seek a voluntary delisting of Pertama from the SGX.

HNS intends to make an exit offer of S$0.65 per share (13% above its last traded price prior to announcement); which is approximately 1.55x historical P/BV.

As anticipated, its stock price surged 11% to S$0.64 upon the lifting of its trading halt to negate any potential for arbitrage.

Recall that just late in May 11, Allgreen Properties announced that it will be privatised. The offer price of S$1.60 for Allgreen was 39% above its last traded price prior to announcement and also 0.96x historical P/BV.

Zang Ligen, chairman of Lizhong Wheel. Photo by Sim Kih

Though the premium on the offer price differs for both privatisation bids, there was at least one common factor: Investors would have made money if they had spotted these potential privatisation candidates prior to the announcement.

It is not difficult to explain the existence of premium on exit offer price over the last traded value of stocks; existing shareholders need “sweeteners” (incentives) to be persuaded to part with their assets.

What we have done for you: Common reasons for privatisation bids include poor valuations, lack of trading liquidity, high costs of maintaining listing status etc.

Thus, we have sieved out a list of 10 SGX-listed stocks from Bloomberg based on the following criteria: (i) currently trading below historical book value; (ii) average daily trading volume below 10,000 shares for the past 6 months, (iii) profitable for the past 3 years; and (iv) positive average ROE for the past 3 years.

What you could do: To play the “privatisation” theme, we would BUY companies which are cheap (trading below book value) and have achieved good return on equity (ROE). Top 3 counters which stand out from our list include Jason Marine, Yongmao and Jacks International.

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S-CHIPS: Which are next possible privatisation candidates?

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#1 YogiBear 2011-07-03 04:47
Unfamiliar names (NEVER HEARD of Jacks International.. ... Yongmao..... ) Not surprisingly, low liquidity. Nevertheless, there could be some really great value stocks there. Just need to dig deeper.

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Counter NameLastChange
AEM Holdings1.860-
Best World2.490-0.010
Boustead Singapore0.9550.005
Broadway Ind0.1570.009
China Aviation Oil (S)0.8750.005
China Sunsine0.400-
Delfi Limited0.875-
Food Empire1.110-
Fortress Minerals0.295-
Geo Energy Res0.300-0.005
Hong Leong Finance2.430-0.010
Hongkong Land (USD)3.440-0.060
ISDN Holdings0.3100.005
IX Biopharma0.040-
KSH Holdings0.250-
Leader Env0.049-
Ley Choon0.0550.001
Marco Polo Marine0.0680.001
Mermaid Maritime0.137-0.001
Nordic Group0.295-0.010
Oxley Holdings0.0880.001
REX International0.125-0.001
Southern Alliance Mining0.485-
Straco Corp.0.480-
Sunpower Group0.220-
The Trendlines0.062-0.001
Totm Technologies0.019-0.001
Uni-Asia Group0.800-0.010
Wilmar Intl3.1400.010
Yangzijiang Shipbldg1.730-0.010

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