SINGAPORE, April 17 (Reuters) — Singapore disk drive component-maker Unisteel Technology (UNST.SI), which said this week it is reviewing options to boost shareholder value, has told analysts that it is a buyout target, one analyst said.
Unisteel was queried by the Singapore Exchange after its share price jumped 20 percent on Tuesday, forcing the firm to say that it was reviewing options to enhance shareholder value.
The company declined to comment on possible takeovers when contacted by Reuters, saying it was still in the preliminary stages of a review.
But an analyst, who covers the stock and declined to be named, said Unisteel had told analysts that unnamed buyers, including private equity firms, had expressed interest in buying the firm.
The analyst and a trader said the unnamed buyers were likely to pay S$1.80-S$2.00 per share, which is at least a 14 percent premium over Unisteel's last traded price of S$1.57 a share on Thursday, valuing the firm at about S$800 million ($593 million).
Unisteel's shares fell 5.4 percent on Thursday.
A second analyst said Unisteel was an attractive target for private equity firms because of its low share price and relatively strong financial position.
Unisteel trades at 11 times forward price-earnings and offers shareholders a dividend yield of around 5.4 percent, according to Reuters data.
Technology sector peers Map Technology and Broadway Industrial trade at a P/E of 6.8 times and 4.5 times respectively.
“Unisteel has a good return-on-equity ratio and is in a healthy net cash position. This firm is also a market leader in its sector. After much consolidation in the tech industry for the past two years, you don't see a better target than Unisteel,” said the second analyst, who also declined to be identified.
Unisteel's return on equity is around 31 percent, according to Reuters data. It had net cash of S$43.3 million at the end of 2007, according to its 2007 financial statement.
Private equity firms have bought several smaller Singapore tech companies in recent years to take advantage of relatively low valuations in a market where investors were more focused on banks and property firms.
TPG Capital and Affinity Equity Partners joined forces last year to buy Singapore's United Test & Assembly Center, a microchip tester, at S$1.20 per share or an eight percent premium, valuing the firm at S$2.2 billion. (Editing by Kevin Lim, Paul Bolding)