Missed the massive GLP buyout trade? Fret not. These companies could be next to be privatised! Private equity sharks love a sluggish market. Attractive valuations give them an opportunity to take good, decent companies private and to sell or re-list them in a few years time when market conditions improve. DBS thinks these 5 companies could be privatized soon!
Past Privatisation Deals
- GLP’s share price spiked by a massive 50% after buyout news was first leaked in Nov 2016. Even if you missed the first rally, you have plenty of opportunity to buy it in Dec and Jan.
- OSIM was a good company. The only problem is the share price is too low. So founder Ron Sim simply took the company private with a hefty 40% premium to last traded price.
- Super Group. Same story – company received buyout offer at 40% premium.
- ARA. Management buyout by founder John Lim. privatize at 10% premium to last price
- Others: Eu Yan San, Cerebos, Sim Lian, China Minzhong, F&N, Otto Marine.
So, how to look for the next privatisation candidates? Company must be 1) profitable, 2) cheap or attractive valuation, 3) not too much debt and 4) shareholder support to enable the privatisation deal succeeds. According to DBS (Paul Yong), these 5 companies may be next to be privatised,
- Courts Asia. Compelling valuations at 8x PER and 0.8x P/B. 75% owned by Singapore Retail Group. Cash outlay to privatise not excessive (about 2.3x FY18 net profit)
- PACC Offshore. Trade at 50% discount to book value. 82% owned by Kuok group.
- Mermaid Maritime. 87% own by Thoresen group. with $270m of cash, it can take Mermaid private. Very low debt compared to peers.
- CSE Global. net cash 20% of market cap. 0.9x P/B and 11x P/E. Free float >50%, no single shareholder more than 15% stake.
- Sinostar PEC. 0.8x P/B and 7x P/E. Trades at nearly net cash per share. Chairman owns 50% of company.