The news: Mencast entered into a sale and purchase agreement (SPA) with Tan Eng Hoe Edwin and Ong Yong Chye (Wang Yongcai) to acquire the entire stake in Unidive Marine Services (Unidive), which is engaged in the provision of a full range of topside (rope access) and subsea (diving) services for the offshore and inshore marine industry, particularly in inspections, repairs, and maintenance. Total acquisition cost will be S$14.85m, of which S$12.425m will be satisfied in cash while the rest will be satisfied via allotment of new shares in Mencast to the vendors of Unidive in four payment tranches.
Our thoughts: For FY10, PBT and NAV of Unidive were S$3.17m and S$6.78m respectively. Assuming a tax rate of 17% (Singapore’s corporate tax rate), Unidive’s PAT in FY10 is estimated at S$2.6m. The proposed purchase consideration would imply a trailing P/E of 5.6x. Compared to Mencast’s trailing and forward P/E of 8.6x and 7.2x respectively, the deal is value accretive. Upon completion, the latest deal would be the second M&A deal in 2011 for Mencast and will take the total acquisitions done YTD11 to S$38.9m. We do not have a rating on this counter.
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