18 listed firms likely to receive privatisation offers

M1 is on the list; check out other big names.

A flurry of privatisation has gripped the Singapore market of late. It was the Asian consumer franchises that started the corporate actions. Next, bombed-out cyclical coal stocks went the route of privatisation as well.

According to CIMB, stocks have generally ended up more than 20% higher on such buyouts. As such, CIMB thinks the wave might go on.

"We believe that globally, corporates have been building up cash to prepare for the worst, ever since Global Financial Crisis. They have the means to make an offer. With Asian consumer businesses among the few structurally-growing units in the world, the initial battle for Asia Pacific Breweries and privatisation of Cerebos were not surprising. The surprise was when coal stocks like Sakari Resources joined the fray. Sakari had been battered-down in recent weeks on ugly short-term prospects, but obviously, buyers had a longer-term perspective. Positioning for more of such corporate actions, we sift the market for stocks trading below -1SD valuations to their historical trading ranges, plus the shareholders with both the interest and means to de-list them," it said.

Who to see offers next?

CIMB thinks that stocks that might receive privatisation offers include the following:

The screening process

CIMB went through a 2-stage process to screen stocks quantitatively and qualitatively.

It's first screen is a quantitative screen, selecting for stocks that are trading below -1SD of their P/BV or P/E trading bands.

CIMB reckons that key characteristics that could trigger privatisation attempts include:

1)valuations below 1x P/BV or replacement values;

2) high net cash on balance sheets;

3) single shareholders with deep-enough pockets plus desire to control the entire entities;

4) high existing ownership by major shareholders; and

5) little need for the companies to tap capital markets for funds in the near future.