(SINGAPORE) As their valuations fall, Singapore-listed companies are becoming more attractive to potential buyers. And this has ramped up takeover activity over the past few days.

Yesterday was reverse takeover day. China Stationery Limited proposes to inject two companies into Singapore-listed Thai Village in a reverse takeover deal worth $296.4 million. Meanwhile, JK Technology Group shareholders approved an RTO that would pave the way for entertainment group St James to be listed on the Catalist board.

Bigger fish have already been fried earlier this week as investment bankers agreed that some companies here are looking cheaper recently compared to about a year ago, and this might herald a wave of in-bound mergers and acquisitions, as more funds and companies look to invest strategically or otherwise.

The action has already begun. Mainboard-listed Bright World Precision Machinery is being bought up by a US-listed special purpose acquisition company. IT company Datacraft will be acquired by its majority shareholder, South Africa-based Dimension Data, and China commodities trader Sinochem International is taking a majority stake in natural rubber supplier GMG Global.

And offers for some of these companies have come in at a premium of a range of 20-30 per cent over their last traded prices.

'The reality right now is that valuations of Singapore companies are more attractive relative to 12-18 months ago,' said Philip Lee, JPMorgan's chief executive of investment banking in South-east Asia. 'Companies with financial capabilities are looking to make strategic investments. It's not a bad time to make investments, especially if investors feel that a company is undervalued.'

Ding Hock Chai, co-head of corporate finance at Kim Eng Capital, agreed. 'Some Singapore-listed companies are now trading at single-digit PE ratios, even good companies,' he said.

Keith Magnus, who heads the Singapore and Malaysia investment banking division at Merrill Lynch (Singapore), said that many traded companies are looking cheap compared to their underlying fundamentals. 'The median takeover premium seen historically in the Singapore market has generally been in the 20 to 30 per cent range,' he said. And this can go up, given the lower reference traded prices, he added.

Historically, in Singapore, the successful acquisitions have involved premiums of at least 25-30 per cent, said George Lee, head of group investment banking, OCBC Bank.

Rohit Sipahimalani, the Singapore-based head of investment banking for Morgan Stanley in South-east Asia, made another point. 'The Singapore market is currently trading at 13 times 2008 earnings, which is in line with the region as a whole,' he said. 'So it is difficult to argue that the recent deal activity is being driven by cheap valuations, although it is true that some companies in Singapore are trading at historic lows.'

The boost in M&A activity has come from many sources. Private equity funds are still active in the region, say bankers. Asia also looks more attractive than Europe or the US to foreign and strategic funds.

All this points to a possible wave of acquisitions in the Singapore market in the coming months.

'Currently, Singapore companies are very attractively valued, particularly since they are fundamentally sound businesses with global and regional operations and sound corporate governance standards,' said Amitava Guharoy, managing director and head of PricewaterhouseCoopers Cor-porate Finance Services. 'We believe that Singapore will continue to remain an active market for M&A transactions.'

The volatility in the markets is not a turn-off, it seems. 'In periods of weak primary market sentiment, investment banks may explore ideas of acquisitions or buyouts with clients,' said Kim Eng's Mr Ding. 'Small to mid-sized companies are now attractively priced. Buyouts, strategic acquisitions arise from smaller sized companies.'

Continued inbound M&A activity in Singapore, especially among small and mid-cap companies, will fuel the market, said Morgan Stanley's Mr Sipahimalani. 'This is driven by the ease of getting deals done in Singapore, the willingness of entrepreneurs to sell companies and a realisation in some sectors that it may be difficult for smaller companies to compete in a tougher economic environment,' he explained.

The marine and technology sectors are looking especially beguiling, said bankers, with marine being a hot theme and some tech companies vulnerable to the global slowdown. All this points to more activity in the days ahead.