This week, markets movements were at a minimum. Singapore’s Straits Times Index (STI) rose marginally, by about 2.5 points, to 3229.01 points, taking its gains to 12.1% for the year. The recent cool off in the markets from the first half of 2017 showed as NetLinkNBN Trust, the biggest Initial Public Offering (IPO) in Singapore since 2011, is set to be priced $0.81. This is near the bottom end of its indicative range of $0.80 to $0.93.
Globally, Hong Kong’s Hang Seng Index (HSI) declined close to 1% while the S&P 500 ended marginally up. In the broader market, the Morgan Stanley Capital International (MSCI) All Country World Index (AWCI), an index made up of 23 developed markets and 23 emerging markets worldwide, traded marginally down for the week.
Buyouts On SGX
In recent months, there has been much talk about companies exiting the Singapore Exchange (SGX) or being bought out. In 2016, there were more delistings than listings on SGX, and this trend looks like it may continue in 2017 with more than 14 delistings and only up to 12 new IPOs so far.
Buyouts represent undervalued companies in the market. It is not particularly healthy if a stock market continually undervalues companies on its exchange. This will discourage more listings in the future, and of course present opportunities for further delistings through buyouts.
Just to give you a flavour of how stocks may be valued, one common ratio is the Price/Earnings Ratio. For the STI, it is trading at a Price/ Earnings ratio of approximately 13.1X while the S&P500 is trading at a Price/Earnings Ratio of approximately 21.2X.
We cover four stocks that have recently had buyout stories placed beside their names, and see how they have performed since the start of the year.
Global Logistics Properties Ltd (SGX: MC0)
GLP has been in the spotlight lately for potential buyout bids from several parties. A constituent of STI, GLP has a market capitalisation of close to $13.1 billion, and provides modern logistics facilities across its close to 600 million sq ft of space located located in over 116 cities, including China, Japan, US and Brazil.
With a strong portfolio that will be difficult to replicate in its key markets, GLP has announced that it has already received several “firm proposals” from its shortlisted bidders. If any deals go through, it will be Asia’s largest buyout by private equity groups.
One key thing to note is that GIC, Singapore’s sovereign wealth fund, is a significant shareholder with a 37% stake in the company.
This week, its share price has fallen by $0.01 to $2.85 on Friday (7 July 2017), and over the past 52 weeks, it has returned 60.7%.
M1 Ltd (SGX: B2F)
With the impending arrival of Australia’s TPG Telecom, Singapore’s fourth telecommunications operator, and its 20.3% share price decline in the past 52 weeks, M1 has also been under close scrutiny for a buyout in recent months.
Earlier this year, the three largest shareholders in M1, Keppel T&T, SPH and Axiata, were reported to be reviewing their stakes in the company, with a view to selling their combined stakes. Potential buyers that were mentioned included China Mobile and its Chinese peers, as well as other private equity firms seeking strategic stakes in telecom ventures.
Another possible buyer also emerged when MyRepublic reported that it was planning an IPO in Singapore in 2018. This was, however, subsequently dismissed by MyRepublic’s CEO, Malcolm Rodrigues.
As mentioned, M1’s 20.3% share price decline in the past 52 weeks has made it an attractive target for investors. In the past two years, it has lost nearly 50% of its value. Over the last week, the company’s share price dropped 3.7% to $2.10 on Friday (7 July 2017).
Croesus Retail Trust (SGX: S6NU)
Croesus Retail Trust, with a portfolio of 11 high quality assets in Japan, has already received a buyout offer of $1.17 per share from Blackstone Real Estate. This comes on the back of Saizen REIT’s sale of its entire portfolio of Japanese assets in 2016.
The trust has been performing stably since listing on SGX close to four years ago. It has acquired new assets to boost its income and distribution, as well as internalised its managers through a buyout.
The current $1.17 offer price represents a 23% premium on its NAV/unit as at 31 March 2017. It is also above Phillip Securities’ and CIMB Securities’ previous target price of $1.08 and $0.98 respectively. Moreover, analyst reports by KGI Securities and CIMB Securities continued to carry “buy” calls, this is mainly because investors may be able to arbitrage on its current share price of $1.18 by accepting the offer and receiving up to $0.0406 in dividends, translating to an all-in consideration of $1.21 per unit.
However, the trust’s largest shareholder, GKG Investment Holdings, was reported that they “wouldn’t be unhappy” if the bid price was revised upwards or another bidder comes into the fray.
Over the past 52 weeks, the trust has returned 52.3%.
United Engineers Limited (SGX: U04)
With more than 100 years of history, UEL is one of Singapore’s pioneering companies, with a property portfolio of Shopping centres, such as Rochester Mall and Chinatown Point, and mixed-used developments such as UE BizHub and AXA Tower, as well as condominiums, hotels and serviced apartments. It has an Engineering and Distribution arm and a Manufacturing arm.
Its largest shareholders began evaluating buyer interest in the property conglomerate in early 2017. It is reported that Perennial Real Estate Holdings has been picked for final talks for the sale of the conglomerate.
Valued at $1.7 billion dollars, the buyout of UEL will mean another significant property deal in Singapore.
Over the past 52 weeks, UEL has delivered a return of 23.9%, and in the past week, its share price has declined close to 1% to $2.72.
4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.
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