More takeovers on the cards as valuations sink to record lows

Temasek-linked companies are prime candidates.

The Singapore Exchange might see a wave of takeover deals as stock valuations drop to their lowest level in years.

A report by RHB Research highlighted that Singapore government-linked companies (GLCs) are prime privatisation targets, as evidenced by recent privatisation deals involving GLCs.

In 2015, there were two privatisation exercises undertaken by GLCs and Temasek-linked companies. The first was Keppel Corporation’s privatisation exercise for Keppel Land, followed by Singapore Airlines’ move to privatise its low-cost carrier subsidiary Tigerair.

Meanwhile, Temasek-owned Neptune Orient Lines has entered exclusive talks for a potential takeover by larger container shipping companies, causing its share price to surge to an all-time high in a matter of weeks.

Other potential deals for GLCs involve the combination of ST Aerospace and SIA Engineering’s aircraft fleet in Asia Pacific, which is expected to happen in the next decade.
Public transport operator SMRT is also a likely privatisation target, particularly in light of the new rail financing framework.

“We think 2016 could be a year of more strategic privatisations and consolidations that could drive the performance of share prices,” RHB said.