Maybank Kim Eng analyst Thilan Wickramasinghe expects more restructuring exercises on the horizon, particularly amongst large-cap companies pursuing asset-light strategies, though their timings will be hard to predict.
Wickramasinghe notes a rising pace in restructurings in Singapore due to structural changes caused by Covid-19 and valuation dislocations. Notable restructurings or privatisations announced in the last six months include exercises by CapitaLand, Wilmar International, Jardine Matheson Holdings, Keppel Corporation, and Olam International.
Wickramasinghe points out that permanent changes to operating environments have instigated the structurings, citing declining office demand and property cooling measures as contributing factors for CapitaLand’s proposed restructuring.
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Given that the drivers catalysing the restructurings continue to remain in play, Wickramasinghe believes there are other potential candidates who may look to restructure or privatise moving forward.
Companies he thinks may restructure include those that might be seeking better valuations for specific markets in which it operates such as Singapore Communications (Singtel) (for its domestic and Australian operations) and Wilmar (for its non-Chinese emerging markets operations).
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Potential restructuring candidates may also include developers such as Keppel, Frasers Property, and UOL Group, as well as Thai Beverage who is looking to hive off its beer business to unlock value.
In the meantime, Wickramasinghe believes 2021 could remain volatile due to liquidity, a steepening yield curve, vaccine logistics and rotation between growth and value. As such, he proposes a Singapore market strategy that calls for a balanced approach between growth and value.
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“We are negative on consumer, gaming, developers and industrials while we are positive on banks, tech, telcos, land transport, plantations and REITs,” he says.
His top picks are Ascendas REIT, Singapore Exchange, Oversea-Chinese Banking Corporation (OCBC), Wilmar, Singtel, ComfortDelGro Corp, Venture Corp, First Resources, AEM Holdings, and Frencken Group.
