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More local firms seen as good takeover targets, say analysts

After a wave of privatisation offers last year, analysts have said more deals may come the way of Singapore's consumer stocks.

SINGAPORE: After a wave of privatisation offers last year, analysts have said more deals may come the way of Singapore's consumer stocks.

Foreign firms looking to tap into Southeast Asia's consumption growth story may see local consumer firms as a good proxy to the region.

One company, coffee maker Super Group, has seen its share price rise on talk that it was an attractive takeover target.

Shares of Singapore-listed Super Group have gone up by as much as 8.4 per cent on talk that it would make an attractive buy for multinational beverage companies.

The share price rose from S$3.69 on January 15 to hit S$4 on January 17, after it was named in a report as an acquisition target. Its shares closed at S$3.90 on Monday.

Analysts said the instant coffee maker is seen as a prized catch because it controls its own "ingredients and manufacturing chain".

The company also has extensive market reach in Southeast Asia, and it is estimated to have a 50 per cent market share in the fast-growing market of Myanmar.

James Koh, sector head of regional consumer research at Maybank Kim Eng, said: "Super is one of the market leaders in key ASEAN markets like the Philippines, Thailand, Myanmar. It has very good brand equity and is often a first mover.

"It also has good production capabilities as well as its own (distribution) network. So in a way, acquirors are buying a fully-integrated company."

Some potential suitors for the firm could include Japanese beverage giants Kirin, Suntory or Asahi Group.

Analysts said that is because these firms have a mandate to diversify from their home market, which is showing slow or even negative growth.

The Japanese firms also have sizeable war chests to fund acquisitions.

Christopher Wong, senior investment manager at Aberdeen Asset Management Asia, said: "There are numerous names in Singapore that have developed that reputation - the brand equity over many decades - companies such as Eu Yan Sang, Petra.

"At the end of the day, (it boils down to) the willingness of the major shareholders to sell, and secondly, the type of valuations that the major shareholders or the other shareholders are asking for."

But analysts said current valuations for Singapore's consumer stocks are high and this could scupper potential deals from the Japanese firms.

Last year, Kirin lost to Thai beverage in the bid for Fraser and Neave's food and beverage business. 

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