3 Companies That Are Poised to Grow Through Acquisitions FREE SPECIAL REPORT

2020-12-15     thesmartinvestor
3 Companies That Are Poised to Grow Through Acquisitions
FREE SPECIAL REPORT

Every company has its own growth ambitions.

More so when a company heads for an IPO as a way to raise more money for expansion.

However, the pandemic this year has thrown a spanner into many companies’ growth works.

Border closures and movement control restrictions have led to a plunge in demand, disrupting many businesses and setting back their plans.

Yet, some companies have continued to soldier on despite the challenges.

A few have even made use of this downturn to conduct acquisitions that will help their business to grow stronger once the crisis abates.

We take a look at three companies that announced acquisitions recently.

Singapore Paincare Holdings (SGX: FRQ)

Singapore Paincare Holdings, or SPH, is a medical service group that provides pain care services and management of chronic and acute conditions.

The group was only recently listed in July this year at a share price of S$0.22 and is the first healthcare IPO of 2020.

Its full fiscal year 2020 results ended 30 June 2020 showed a more than doubling of revenue to S$9.6 million, while net profit increased by nearly 50% year on year to S$1.9 million.

At end-November, SPH announced that it will acquire a 40% stake in KCS Anaesthesia Services Pte Ltd for S$2.4 million from Dr Kong Chee Seng.

KCS is in the business of providing anaesthesia services and procedures and was wholly owned by Dr Kong before this transaction.

After the transaction, Dr Kong will retain a 60% stake in KCS and also be employed as an executive director and anesthesiologist.

For KCS, its net profit after tax as of 29 February 2020 was S$1.1 million.

This purchase values KCS at S$6 million (for a 100% stake), implying that SPH had purchased it at around 5.5 times earnings, which appears to be a bargain in the healthcare sector.

Cortina Holdings Limited (SGX: C41)

Cortina is a luxury watch retailer with boutiques located around Asia.

The group distributes well-regarded watch brands such as Rolex, Patek Philippe, Piaget and Omega, and has boutiques located in Singapore, Malaysia, Thailand, Taiwan, Hong Kong and Indonesia.

Due to COVID-19, the group saw revenue plunge 32% year on year to S$173.8 million for the first half of its fiscal year 2021 as people held back on spending.

Profit after tax declined by 23% year on year to S$14.6 million.

In mid-November, Cortina announced that it will be acquiring Sincere Watch Limited.

Sincere’s principal activity is in the retailing and distribution of luxury timepieces, and its portfolio of brands includes Panerai, Tudor and Audemars Piguet.

It operates a total of 18 boutiques under the Sincere brand in Singapore and Malaysia, and under the Pendulum brand in Thailand.

Cortina will pay S$84.5 million for this acquisition, and its approval is subject to an extraordinary general meeting to be convened.

However, investors should note that Sincere incurred a net loss of S$6.4 million for the fiscal year 2020.

The rationale for this acquisition is that it will provide exclusive distributorship rights to Cortina for the Frank Muller brand in 12 countries within Asia-Pacific.

Besides, acquiring Sincere will provide the group with a wide array of brands that can be distributed through its existing outlets.

While Sincere may be making losses before the acquisition, investors should have faith that Cortina’s management can turn it around and extract valuable synergies from this purchase.

Jumbo Group Ltd (SGX: 42R)

Jumbo is a multi-dining concept food and beverage (F&B) group with a portfolio of six brands across a wide variety of Chinese cuisines.

The group owns 37 F&B outlets in 15 cities in Asia, and also provides catering services for its Singaporean customers.

In late November, Jumbo announced the acquisition of a 75% stake in Kok Kee Wanton Noodle Pte Ltd (KKWN).

The consideration for the deal will be S$2.1 million, with 70% being paid in cash and the remaining 30% settled by an allotment of shares in Jumbo.

KKWN started in 1985 and is now operating at 30 Foch Road in a Bistro 8 coffeeshop.

It is known for its springy noodles and special lard-based sauce and is a popular name among Singaporeans.

Jumbo is aiming to gradually expand its brands and concepts under the group’s umbrella and believes that hawker food will do well as it is an entrenched part of Singapore’s culture.

The acquisition also diversifies away from the group’s current restaurant concepts and focuses more on mass-market dining with fast turnover or takeaway, thereby broadening Jumbo’s revenue streams.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

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