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Open offer price looks attractive for minority investors
Siemens AG’s (SIE GY, Hold, CMP EUR97) open offer to acquire a further 19.82%
stake in Siemens India at INR930/sh (record date is 18 February) looks to be a
good deal for minority shareholders, in our view. Our sensitivity analysis shows
that investors can make good returns assuming ~75% of minority investors tender
shares in the open offer (higher than the 49% tendering in the ABB India open
offer). We maintain our 12-month TP of INR740 (20x Sep’12E EPS) and expect the
stock to settle closer to its fair value after the open offer, as in other similar cases.
ABB India’s open offer elicited ~49% subscription from minority investors
To recap, ABB (ABBN VX, Hold, CMP CHF 22) had proposed to purchase up to an
additional 20% of ABB India at INR900/sh at a time when the stock price was
languishing at INR673/sh. (There had been 12 months of 4% underperformance up
until 17 May 2010, the date of the announcement). After the announcement, ABB
India stock rose to INR865, 4% below the open offer price. However, a look at the
tendering process shows that only 49% of public shareholders tendered their
shares as institutional insurance investors did not subscribe to the offer.
Amongst MNC subsidiaries, Siemens India’s performance is encouraging
Within our coverage space Siemens India was one of the few companies that we
recently raised our earnings estimates for thanks to its continued good order
inflows vs. the earnings downgrades occurring at all other companies. Its 28%
RoE is also amongst the best in its peer group and our EPS estimates are amongst
the highest on the street.
12-month INR740/share target price reflects slowdown expectations
Our target price of INR740 is based on 20x Mar’12E EPS. This reflects our broader
sector view of a slowdown in the investment cycle that could hurt overall sector
valuations. The key upside risk is that the stock could remain at an elevated level in
the short term till the completion of the open offer as the offer price is significantly
higher than the current market price. Other upside risks are continued large order
wins in export markets and a pickup in the investment cycle in India. The key
downside risks are a slowdown in revenue booking or quarterly earnings volatility.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Open offer price looks attractive for minority investors
Siemens AG’s (SIE GY, Hold, CMP EUR97) open offer to acquire a further 19.82%
stake in Siemens India at INR930/sh (record date is 18 February) looks to be a
good deal for minority shareholders, in our view. Our sensitivity analysis shows
that investors can make good returns assuming ~75% of minority investors tender
shares in the open offer (higher than the 49% tendering in the ABB India open
offer). We maintain our 12-month TP of INR740 (20x Sep’12E EPS) and expect the
stock to settle closer to its fair value after the open offer, as in other similar cases.
ABB India’s open offer elicited ~49% subscription from minority investors
To recap, ABB (ABBN VX, Hold, CMP CHF 22) had proposed to purchase up to an
additional 20% of ABB India at INR900/sh at a time when the stock price was
languishing at INR673/sh. (There had been 12 months of 4% underperformance up
until 17 May 2010, the date of the announcement). After the announcement, ABB
India stock rose to INR865, 4% below the open offer price. However, a look at the
tendering process shows that only 49% of public shareholders tendered their
shares as institutional insurance investors did not subscribe to the offer.
Amongst MNC subsidiaries, Siemens India’s performance is encouraging
Within our coverage space Siemens India was one of the few companies that we
recently raised our earnings estimates for thanks to its continued good order
inflows vs. the earnings downgrades occurring at all other companies. Its 28%
RoE is also amongst the best in its peer group and our EPS estimates are amongst
the highest on the street.
12-month INR740/share target price reflects slowdown expectations
Our target price of INR740 is based on 20x Mar’12E EPS. This reflects our broader
sector view of a slowdown in the investment cycle that could hurt overall sector
valuations. The key upside risk is that the stock could remain at an elevated level in
the short term till the completion of the open offer as the offer price is significantly
higher than the current market price. Other upside risks are continued large order
wins in export markets and a pickup in the investment cycle in India. The key
downside risks are a slowdown in revenue booking or quarterly earnings volatility.
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