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NRA Capital Pte Ltd

Written by: Jacky Lee

Monday 16 Mar 2015

Serial System – press release

Agreement to acquire printer accessories distributor Swift Value for a total consideration of around S$13m

Maintain forecast and fair value of S$0.25

Serial Systems has entered into a sale and purchase agreement (SPA) with Swift Value Business Pte Ltd, under which the group will acquire the entire shareholding interest in the capital of Swift Value from owner Neo Siew Wah. The consideration is made up of S$3m of Swift Value's net tangible assets, plus a premium of S$10m and 20% share of net profit after tax for the financial years ending 31 December 2015, 2016 and 2017. The total consideration payable for the 3 financial years is estimated to be approximately S$1.2m (US$0.9m) based on historical trend analysis with projected growth rate.

Swift Value, a company incorporated in Singapore, is principally engaged in the business of distribution of printer accessories such as ink cartridges and toners.

Our view:

The group believes the acquisition is in line with its strategy to acquire companies which may capitalise on the group’s competitive strengths and extensive distribution networks, and expand the group’s product lines and ranges and customer base. It believes that Swift Value is complementary to its business in the distribution of consumer electronic products. Swift Value will be able to leverage on Serial System’s expertise as well as operational synergies and economies of scale.

Though we view this more than 4x P/NTA acquisition is relatively expensive, its average 6.5x PER over the next three year seems reasonable. We maintain our earnings forecast and S$0.25 fair value.   


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