With more than half of Singapore equities trading below their net worth, some investors are chasing profits by buying shares in companies that may be bought out or delisted by controlling shareholders or takeover firms.
“Investors are looking for takeover candidates because prices have come off significantly,” Justin Tang, a director of global special situations at Religare Capital Markets in Singapore, told Bloomberg.
“We may see an increase in delistings and takeovers this year because of this.”
One such company is Global Logistic Properties Ltd., a warehouse operator, whose shares have soared 53% since November amid reports that several firms, including Blackstone Group LP and Warburg Pincus, are seeking to acquire it, the report said, citing unnamed sources.
Property and oil and gas-related companies offer good value for potential buyout or takeover premiums, said Christopher Wong, a fund manager at Aberdeen Asset Management Asia Ltd.
Aberdeen funds hold shares in Wheelock Properties Singapore Ltd., which trades at 0.68 of its book value and has founding investors controlling about 76% of the shares.
“If stocks continue to be in the doldrums, then the probability of them being privatized is higher,” Wong was quoted as saying.
Other potential buyout candidates trading below book value are Mermaid Maritime Pcl and Dyna-Mac Holdings Ltd., said Carmen Lee, head of research at Oversea-Chinese Banking Corp.
These companies are controlled by no more than three shareholders, are profitable at earnings before interest, tax and depreciation and amortization level, and have a debt-to-equity ratio of less than 50%, according to Bloomberg data.
Meanwhile, elevated penny stock punting and a push on banks UOB and OCBC provided the main features of Tuesday’s trading, in which the Straits Times Index rose 14.73 points to 3,071.64. Turnover amounted to a healthy 3.7 billion units worth S$1.3 billion ($920 million) and excluding warrants there were 252 rises versus 207 falls.
More than two-thirds of the index’s rise came from gains in OCBC and UOB, with notable contributions from Keppel Corp and City Developments. There was some speculation that funds were switching out of 2016’s regional outperformers Thailand and Indonesia and into the local market because of the latter’s softness last year.
The average value per unit traded was S$0.35, indicating that hectic punting of low-priced issues was very much present—18 of the 20 most actively traded stocks were priced below S$0.50, with 17 below S$0.20.