Net cash position of locally listed firms almost doubled in 1H14: report

Expect more M&A deals this year.

The net cash position of all listed companies in Singapore increased from $336.2 million to S$644.7 million in the period between 30 June 2013 and 30 June 2014, indicating a greater capacity and appetite to engeage in mergers and acquisitions.

According to a report by KPMG, companies in Singapore have displayed an increasing appetite, with price/earnings ratios rising 4% on the whole. Predicted P/# ratios are an important a measure of appetite of corporate confidence.

Globally, an improving global economy and large corporate cash reserves contributed to a 26% increase in the value of announced mergers-and-acquisitions (M&A) deals between January and June of 2014.

“We have seen markedly increased M&A activity in Singapore, particularly in the mid-market space over the last 12 months, and the forward P/E numbers are telling us that this activity is likely to continue for the next few quarters at least, reflecting overall market confidence,” noted Vishal Sharma, KPMG’s Head of M&A for the Asia Pacific region.

Here’s more from KPMG:

The increase in appetite is matched by an anticipated increase of capacity – indicated by the net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio – of 13 percent over the next year.

This means that corporates are continuing to pay down debt and have an increasing amount of cash with which to fund deals.

Africa and the Middle East is expected to have the largest increase in capacity over the next year at 24 percent, while the Asia Pacific region excluding Japan comes next at 21 percent.

Singapore is expected to see a 10 percent increase in capacity over the next year, Malaysia (31 percent), Indonesia (47 percent) and Vietnam (27 percent). 

For Southeast Asia, Vietnam showed the highest increase in confidence levels at 44 percent.