A wave of privatisations is about to hit the SGX: report

Guess who the most likely candidates are.

Plenty more listed companies are likely to take a leaf out of OSIM's book and opt to privatise in order to take advantage of current inexpensive valuations, according to a report by OCBC Investment Research.

The report showed that after a series of sell-downs which hammered the market in recent months, 431 companies out of the 700 firms listed on the SGX are now trading below 1.0 times their book value. In addition, 193 companies are trading at below 0.5 times their book value.

“Given how much share prices have declined and how attractive valuations are for certain companies out there, it is not surprising that bargain hunters are once again on the prowl for good deals,” OCBC noted.

At the same time, low capital costs and plenty of liquidity means that stronger corporates and individuals will be more likely to engage in acquisition or takeover deals/

“We get the sense that investors in general still believe in the long-term prospects of Asia, and many companies on the SGX have huge exposure to this market. A dim outlook in the near term is by no means a sure bet on share price underperformance, as holding companies and individuals are still flush with cash and ready to take companies private if they are comfortable with the companies’ long term outlook,” OCBC said.

OCBC believes that prime privatisation targets include companies that are in a net cash position and have large controlling shareholders. Such a criteria provides firms with greater operational flexibility and the opportunity to re-list in the future at better valuations. OCBC also looked at companies with significant insider trading in recent months in order to come up with its list of prime privatisation targets.

Based on OCBC’s metrics, the companies which are more likely to be delisted or taken over include offshore and marine players such as Dyna-Mac Holdings, PEC Ltd, PACC Offshore Services Holdings, Pacific Radiance, Baker Tech, Triyards, KS Energy, Mermaid Maritime, KrisEnergy, ASL Marine.

Technology firms such as Innovalues and Sunningdale Tech are also prime targets, as are property companies Wing Tai and Wheelock Properties (S).

Other likely candidates are consumer-oriented companies Parkson Retail Asia and Courts Asia, as well as firms like Banyan Tree, CWT, Cogent Holdings and Tat Hong.