What is the news?
Wizwash Pte Ltd, a wholly-owned subsidiary of 800 Super Holdings Limited (the “Group”) has entered into a call and put option agreement to acquire Iwash Laundry (Senoko) Pte Ltd (“Target”) from Fairlady Jewellers Private Limited (“Fairlady”), Lee Yok Sim (“LYS”), Chua Yun Chean (“CYC”) and Tan Choon Huat (“TCH”) (collectively, the “Vendors”) for S$4,998,960. The sum is to be paid in two tranches. Wizwash Pte Ltd was incorporated on 25 September 2017 with a paid-up capital of S$1 mn.
How do we view this?
The Proposed Acquisition has been classified as a “non-disclosable transaction”. For the net profit of the Target to be less than 5% of the Group’s net profit, we derive that the Group would be paying at least 5.8 times earnings for the acquisition.
Maintain Buy; unchanged target price of S$1.53
We like the stock for its recession-proof business model. The ongoing sludge treatment facility project is expected to contribute to Group earnings over the long-term. No changes to our forecasts at this time. Our target price gives an implied FY18e forward P/E multiple of 16.9x. This compares against the Straits Times Index 12-month forward P/E multiple of 14.5x.