Company acquisitions in focus as directors reduce transactions

FOR the four trading sessions that spanned July 16 to 22, the Straits Times Index (STI) gained 0.6 per cent, with the FTSE China A50 Index, Hang Seng Index and FTSE Bursa Malaysia KLCI averaging a 0.6 per cent decline.

Within the STI, CapitaLand C31 , Singapore Exchange S68 , Ascendas Reit A17U , Keppel Corporation BN4 and Frasers Logistics & Commercial Trust BUOU : BUOU 0% received the highest net institutional inflows during the period.

Outside the STI, AEM Holdings AWX , NetLink NBN Trust CJLU , Frencken Group E28 , Nanofilm Technologies International MZH and Tianjin Zhong Xin Pharmaceutical T14 : T14 0% Group received the highest net institutional inflows.

Overall, institutions were net sellers over the four sessions, to the amount of S$11 million, with Singapore Airlines C6L , UOB U11 and DBS D05 : D05 0% recording the highest net institutional outflow.

Share buybacks

The Hour Glass AGS : AGS 0% was the sole SGX primary-listed stock that conducted share buybacks over the four sessions, buying back shares on July 16, 19 and 22.

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This saw it buy back 2,219,000 shares, at an average price of S$1.43 per share. This took the cumulative number of shares it purchased on the current mandate to just over 7.0 million shares or 1.00 per cent of its issued shares excluding treasury shares.

The Hour Glass also led the buyback consideration tally for the preceding five sessions.

The decline in buyback transactions coincides with the onset of earnings season in Singapore and as best practice, companies should refrain from buying back their shares during the two weeks immediately before semi-annual financial statements and one month immediately before the full-year financial statements.

Director and substantial shareholder transactions

The four trading sessions saw less than 40 changes in director interests and substantial shareholdings filed for 19 primary-listed stocks. This included two company director acquisitions with one disposal filed, while substantial shareholders filed one acquisition and three disposals.

While director transactions have slowed ahead of upcoming earnings, asset acquisitions made by companies and Reit managers have continued at a vigorous pace as exemplified by Yangzijiang Shipbuilding BS6 (Holdings) (Yangzijiang), Prime US Reit OXMU (Prime), ComfortDelGro Corporation C52 (ComfortDelGro) and Fu Yu Corporation F13 : F13 0% .

Other developments included Mapletree Industrial Trust ME8U completing the acquisition of 29 data centres located in the United States on July 22, and LHN 41O completing the acquisition of the 115 Geylang property from Chip Eng Seng Corporation C29 : C29 0% .

Anan International provided an update on the acquisition of a refined petroleum products distribution company, while TEHO International 5OQ : 5OQ 0% provided an update on its wholly owned subsidiary's acquisition of a warehousing facility in Texas.

ESR-Reit

On July 16, Mondrian Investment Partners reduced its deemed interest in ESR-Reit J91U : J91U 0% to below the substantial shareholder threshold. The disposal of 7,876,600 units of ESR-Reit at 44.1 cents per share reduced the deemed interest of Mondrian Investment Partners in ESR-Reit from 5.12 per cent to 4.92 per cent.

Back on Dec 1, 2020, the discretionary investment management company filed that it had increased its deemed interest in ESR-Reit from 5.95 per cent to 6.00 per cent with 2,101,800 shares acquired at 40.5 cents per share.

On July 23, the managers of ESR-Reit, reported that the industrial Reit delivered 14.3 per cent year-on-year growth in its H1FY21 (ended June 30) distribution per unit.

Sanli Environmental

On July 19, Pek Kian Boon sold 9,174,400 shares of Sanli Environmental 1E3 : 1E3 0% at 16.8 cents per share. With a consideration of S$1,541,936, the disposal reduced his direct interest in the company from 13.99 per cent to 10.66 per cent.

His preceding disposal was on Sept 9, 2020 and comprised 2,428,900 shares sold at 6.2 cents per share.

Mr Pek is a former executive director of Sanli Environmental, who resigned from the group on Jan 31, 2019 to pursue other personal interests and career opportunities.

On July 15, Sanli Environmental announced that it had been awarded a S$72.67 million contract from the Public Utilities Board (PUB) for the construction and commissioning of new disinfection systems at Johor River Waterworks, located at Kota Tinggi, Johor, Malaysia.

With the award of the contract, Sanli Environmental now maintains a total order book of S$329.8 million, expected to be completed by early 2026.

Yangzijiang Shipbuilding (Holdings)

On July 21, Yangzijiang announced that it had entered into a sale and purchase agreement (SPA) with Sanfu Shipbuilding Holdings. The SPA will see Yangzijiang purchasing the remaining 20 per cent equity stake in Jiangsu Yangzi Xinfu Shipbuilding, for an aggregate consideration of 650 million yuan, fully funded by 100 million treasury shares of Yangzijiang.

The transfer price for each consideration share is 6.5 yuan, equivalent to approximately S$1.37. This represents a 0.63 per cent premium to the volume-weighted average share price on July 21.

Yangzijiang executive chairman and CEO of the group Ren Letian noted that the acquisition signifies a huge investment in one of Yangzijiang's key business units and in its existing major shipyard.

Expecting to be earnings accretive for the group, Mr Ren added that the acquisition is part of the group's continuous efforts to enhance long-term growth prospects and shareholder value.

Mr Ren maintains a 4.31 per cent deemed interest in Yangzijiang Shipbuilding.

In the first half of its FY21 (ended June 30) the group secured new orders for 100 vessels worth US$5.59 billion, surpassing the previous record largest order wins (based on total contract value) for a fiscal year in the group's history (previously set at US$4.97 billion in FY07).

Prime US Reit

Recently, the manager of Prime, KBS US Prime Property Management, announced the completion of the acquisitions of One Town Center in Boca Raton Florida and Sorrento Towers in San Diego's Technology Hub, California.

A recent US$80.0 million private placement of Prime units was utilised to partially fund the acquisitions.

More than two times subscribed, the US$80 million private placement launched back on June 24, received strong demand from both existing unitholders and new investors with a good mix of long-only institutional investors, multi-strategy funds, family offices, and private wealth clients.

Institutional investors accounted for over half the demand and final allocations, accompanied by strong private wealth and family office interest.

The acquisitions have expanded the geographical footprint of Prime in new and existing markets within the United States, with no single market contributing more than 11.7 per cent, while extending the portfolio weighted average lease expiry and creating yield accretion.

This has followed on from a distribution reinvestment plan established for Prime on June 21.

After listing in July 2019, Prime made its first asset acquisition in February 2020 of Park Tower for US$165.5 million, which was also partly funded by a private placement.

At the recent AGM, the manager maintained that Prime is well positioned to pursue quality acquisitions this year, and would like to target AUM growth of 20 per cent per annum in a normal operating environment.

KBS US Prime Property Management will release the H1FY21 (ended June 30) financial results for Prime after the market close on Aug 3.

KBS US Prime Property Management chairman and non-executive director Charles J Schreiber Jr, maintains a 1.06 per cent deemed interest in Prime.

ComfortDelGro Corporation

On July 21, ComfortDelGro announced that its wholly-owned subsidiary, ComfortDelGro Corporation Australia through its wholly-owned subsidiary, CDC South East Queensland, entered into an agreement with Phyllis Young, Philip Young and David Young to acquire the business assets of Young's Bus Service based in Rockhampton, Queensland, Australia.

The total purchase consideration of A$17.5 million (approximately S$17.53 million) includes the acquisition of the recently constructed Yeppoon Depot, is subject to regulatory approval and will be financed through internal funds.

Back on May 12, ComfortDelGro highlighted that Australia is now the group's single largest overseas investment destination with public scheduled bus, private coach charter, ambulances, taxis and outdoor advertising operations.

For its FY20 (ended Dec 31, 2020), the Australian businesses generated revenue of S$608 million, making it the group's best performing overseas operation.

Fu Yu Corporation

On July 16, Fu Yu Corporation announced that its wholly-owned subsidiary, Fu Yu Ventures, entered into a sale and purchase agreement (SPA) to acquire Avantgarde Enterprise (Avantgarde) for a consideration of US$4.5 million.

Avantgarde was incorporated in Singapore on Nov 11, 2019 and is engaged in the business of providing supply chain management services for commodities and trading in exchange-traded financial futures.

For its FY20 (ended Dec 31), Avantgarde recorded net profit before tax of approximately S$3.73 million.

Fu Yu Corporation engaged JLB Alliance to provide a valuation report (on a scenario basis) on Avantgarde, issued on May 10.

Fu Yu Corporation intends to fund the acquisition through internal resources and reserves.

For its Q1FY21 (ended March 31), the company's net profit climbed 15.9 per cent to S$5.1 million from Q1FY20, with the balance sheet remaining robust with cash holdings of S$108.2 million and zero borrowings.

On July 19, Fu Yu Corporation appointed Christopher Huang as an independent director of the company.

Mr Huang is the managing director of CHP Law, which provides value-driven and cost-efficient legal services that span corporate law, mergers & acquisitions, tax, private clients, general commercial advice, corporate governance, shareholder disputes, commercial disputes, cross border transactions, restructuring & insolvency, and employment.

• The writer is the market strategist at Singapore Exchange (SGX). To read SGX's market research reports, visit sgx.com/research.