Jul 24, 2014

    S'pore may see $11b more in M&A deals this year

    SINGAPORE, which has seen about $9 billion worth of mergers and acquisitions (M&As) year to date, could see a further $11 billion pending this year, Daiwa Capital Markets said yesterday.

    So far, the deals have been in diverse sectors including property, consumer and industrial - all priced at high premiums compared to the target companies' prevailing valuations at the time.

    The research house said it was uncertain which industries would continue to see M&A activity. But low interest rates and a stable macro environment should drive M&A activity as companies look to buy, rather than build, to improve their competitive positions.

    Keppel Land and Frasers Centrepoint Trust are among Daiwa's stock picks in Singapore. It also likes other retail Singapore real estate investment trusts, including CapitaMall Trust and Starhill Global Reit.

    On the property group, Daiwa said: "Amongst the large-cap Singapore developers, our top pick is Keppel Land. The stock offers deep value, trading at a 32.6 per cent discount to what we consider as our conservative SOTP (sum-of-the-parts) valuation of $5.11/share, within which we have factored in assumptions including a 20 per cent decline in ASPs (average selling prices) for most projects in view of current market concerns about China's residential market."

    Keppel Land is also seen as a key beneficiary of the current Singapore office market upturn, with a 44.7 per cent stake in Keppel Reit and direct stakes in several buildings in downtown Singapore.

    The research house expects Singapore's stock market to hold onto its recent gains for the rest of the year, supported by mergers and acquisitions in industries seeking to unlock value.