OIR BITES: CWT Limited – Interest showing from private equity firms‏

Informal approaches for buying CWT
Reuters reported that private equity (PE) firms KKR, Blackstone and Bain Capital have made informal approaches for buying CWT Limited (CWT), which has a current market cap of S$1.26b.

Interest from these PE firms came as CWT’s controlling shareholder, C&P Pte Ltd (C&P), which owns ~32% stake in CWT, announced its intention to perform a strategic review over its business and assets that may or may not lead to sale of the company (including stake in CWT).


Recent logistics transactions
The most recent M&A deal in Singapore involving a logistics company was the divestment of APL Logistics by NOL in May 15. The acquirer, Kintetsu World Express, agreed to pay US$1.2b for the business, which was at a valuation higher than market expectations based on past transactions.

Another one was in Feb 15, when Japan Post Holdings agreed to pay A$6.5b for Australia’s freight and logistics firm, Toll Holdings, at a higher-than-expected valuation as well. We note that its offer price was at a 49% premium to the closing price a day earlier to the offer announcement.

Nothing concrete for now
According to SGX, a mandatory general offer for the entire firm will be triggered if any acquirer buys up 30% or more stakes in the company.

However, at this point in time, Reuters reported that while PE firms have indeed showed interest, there had been no formal approach yet.

CWT also clearly stated on Monday that C&P’s strategic review may or may not lead to an actual transaction.

Hence, with nothing concrete and uncertainty over whether any transaction will take place at all, we think investors should be cautious over any speculation on the valuations of the potential transaction.


Technical Analysis
Daily Chart
In our view, CWT is currently fairly valued based on blended FY15/16F SOTP valuations. Maintain HOLD with a FV of S$2.05.

Source : OCBC Investment Research

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