SG Strategy

SG Strategy: UOB Kay Hian has an SG strategy report, focusing on M&A's. The house see M&A as a continuing area of interest. Other than privatisation candidates, companies with accretive acquisitions or monetisation of assets could attract investor interest. Overall, see see several angles for M&A. This could include companies looking for growth through: a) accretive acquisitions; b) monetisation of assets through disposals or listings; and c) privatisation. - Accretive acquisition. In the acquisition space, think stocks such as CapitaCommercial Trust (CCT), Frasers Centrepoint (FCT) and Halcyon could benefit from accretive acquisitions and availability of financing. CCT’s and FCT’s low net gearing of 29% and 30% respectively means that these two groups have an ample warchest for acquisition. As for Halcyon, believe the group is a beneficiary of accretive acquisition opportunities in mid-stream rubber processing. - Monetisation of assets. In this bucket, the likely beneficiary is Sino Grandness. The group is considering a proposal to list its F&B subsidiary Garden Fresh, which could help unlock value and to allow Garden Fresh to fund its growth plans. The oil services sector is expected to be very active too in terms of monetising its assets by listing due to reasons such as cabotage (in Indonesia) and access to capital markets. Companies potentially spinning off their subsidiary include ASL, Swiber, Ezra and Otto Marine. - Privatisation candidates. Interest in this area has been heightened by the recent speculation over the potential privatisation of Biosensors by its substantial shareholder. Kreuz was recently successfully taken over by SEA9. Screening for undervalued stocks, see potential privatisation interest in Jaya Holdings (non-rated), Wheelock, Guocoland, Tuan Sing (non-rated), Biosensors (non-rated) and GP Industries (nonrated).