SINGAPORE (April 7): UOB KayHian is keeping Sunningdale on “hold”, recommending investors enter Sunningdale at $1.65 with a target price of $1.83 in mind.
This comes as the stock has returned 29% since UOB’s initiation report in early March and recent insider transactions suggest that a potential privatisation might not be imminent.
As it is, the M&A fever in the precision engineering space is humming along fine. On April 5, Fisher Tech announced it had received a non-binding expression of interest from a third party, relating to a possible transaction involving the shares of the company.
Sunningdale operates in three segments, namely the consumer IT, automobile and healthcare. Management has not ruled out the possibility of the company venturing into other areas which could possibly include the aerospace and energy sectors. UOB’s channel checks indicate that Sunningdale is already qualified in the aerospace sector.
In a Friday report, analyst Nicholas Lew says Sunningdale remains a prime M&A target, given its substantial free cash flow and solid balance sheet. But in late March, Sunningdale’s non-executive chairman Koh Boon Hwee, acquired from the open market an additional
1 million shares in Sunningdale at an average price of $1.5985.
“This gives us further confidence in the future prospects of the company. However, given Mr Koh’s recent purchases of Sunningdale stocks, privatisation might not be imminent,” says Lew.
But should a privatisation occur, Lew says there could be further upside to UOB’s $1.83 target price which implies a historical 2016 P/B ratio of 1.0x. This comes as Spindex, Innovalues and Chosen were privatised at above historical book valuation.
Shares of Sunningdale are up 3 cents at $1.80.
