Brokers' take: Pace of mergers, restructuring likely to pick up in Singapore

SINGAPORE companies will likely see more transactions for mergers and acquisitions (M&As), privatisations and restructuring in the near to mid term amid low interest rates and cheap market valuations, Maybank Kim Eng said.

In a report on Sunday, analyst Thilan Wickramasinghe said Singapore may be a "focal point for more deals going forward", with deals likely driven by four key factors: digitalisation amid the pandemic, an increased focus on sustainability, distressed business models due to Covid-19, as well as special purpose acquisition companies (SPACs) and government initiatives.

Mr Wickramasinghe expects transactions will be led by government-linked companies, high-growth small and mid-cap listed companies and late-stage startups, and named 13 players that have the potential for more deals.

Electronics service provider AEM Holdings AWX - which in August raised S$103.1 million through a private placement from state investment firm Temasek Holdings - will likely speed up acquisitions and research and development efforts, and make bigger M&As with targets that have a strong existing value proposition and cash flows.

Shares of AEM closed up S$0.04 or 1 per cent at S$4.17 on Monday.

Ascendas Real Estate Investment Trust (Reit) A17U will likely expand in its core markets in Singapore, Europe, Australia, UK and US, and increase contributions from new economy assets including business park space, data centres, and logistics properties, while Singapore-based bank DBS D05 will likely expand in markets including India, China and Indonesia.

Units of Ascendas Reit closed down S$0.01 or 0.1 per cent at S$3.09, while shares of DBS closed up S$0.65 or 2.2 per cent at S$30.00.

For Singtel Z74 , the telco's strategy to monetise latent assets, broaden 5G offering and increase focus towards information technology can potentially split the group into an infrastructure and a customer-facing network operator service segments. Its core operations in Singapore and Australia may also be privatised since they are valued close to zero, and it may enhance its digital finance business since it had won a digital banking licence.

Meanwhile, agribusiness giant Wilmar International F34 may focus on restructuring and unlocking further value of its business portfolio in Indonesia, Vietnam and Africa and in sugar.

Singtel was closed up S$0.01 or 0.4 per cent at S$2.51, while Wilmar closed up S$0.03 or 0.7 per cent at S$4.11.

Maybank KE has a "buy" call on AEM, Ascendas Reit, DBS, Singtel and Wilmar.

The brokerage also expects bourse operator Singapore Exchange (SGX) S68 to invest in digitalisation of fixed income, foreign exchange and other accretive opportunities, and has a "hold" call on the stock. Its shares closed up S$0.06 or 0.6 per cent at S$10.10.

Meanwhile, two startups, online classifieds firm Carousell and car-sales platform operator Carro, may be considering SPAC listings.

The former, which has high profile backers including Telenor Group, Rakuten, Naver and Sequoia, may make a listing that could value it at US$1.5 billion, while the latter also has strong investors such as Softbank.

Property developer City Developments C09 may have further restructuring and M&A plans, driven by its Covid-hit hotel and property development businesses, its application for an initial public offering (IPO) of its UK assets, and its writedown of investments in troubled Chinese developer Sincere Property Group. City Developments shares closed flat at S$7.06.

Keppel Corp BN4 and Frasers Property TQ5 , which both have large Reit management roles and large property development divisions, may also restructure similar to CapitaLand by taking their property development segment private to improve valuation transparency.

Shares of Keppel closed up S$0.07 or 1.3 per cent at S$5.29, while Frasers Property closed flat at S$1.13.

Furthermore, Olam's O32 Food Ingredients unit may separate from its parent company and IPO, while Sembcorp Marine (Sembmarine)'s S51 potential merger with Keppel's Offshore and Marine (O&M) segment can provide scale in the sector and give it resources to transition towards green energy.

Olam shares closed up S$0.02 or 1.2 per cent at S$.172, and Sembmarine shares closed flat at 8.1 cents.

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