UIS

[valuenewb]

Anybody in UIS?

I am not sure if it's a value stock or a value trap. I have it in CPF so it's kind of sleeping there.

For those not familiar with UIS, it is the lone-standing closed-end fund on SGX that has a global balanced mandate to invest in equities and bonds.

(Each local bank had 1 listed closed-end fund but DBS and OCBC voluntarily liquidated their funds in 2000 and 2001 to "enhance shareholder value".)

The current UIS is an animal formed after UIS swallowed up OUS (then managed by OUB) after the UOB-OUB "merger".

Why can/should it be considered a value stock? It trades at an average of 17-18% over the past months, meaning you are only paying 82 cents for $1 worth of investment. Some 5% of the fund is invested in UOB alone.

Why can/should it be considered a value trap? Maybe the discount will be a permanent feature of UIS since the majority (Wees) effectively have control over UIS (through its cross holding in UOB, UOI, Pan Pac).

Any comments?

[d.o.g.]

Why can/should it be considered a value stock? It trades at an average of 17-18% over the past months, meaning you are only paying 82 cents for $1 worth of investment. Some 5% of the fund is invested in UOB alone.

Why can/should it be considered a value trap? Maybe the discount will be a permanent feature of UIS since the majority (Wees) effectively have control over UIS (through its cross holding in UOB, UOI, Pan Pac).

Any comments?

As the fund is highly unlikely to ever be liquidated (as Laxey is slowly finding out) you can only get out by selling to others. So there are then 2 considerations:

1. Will NAV increase?
2. Will the NAV discount narrow or widen?

A look back in history will make clear whether NAV (adjusted for dividends) has increased over time, and it will also show how the NAV discount changed with time.

[valuenewb]

Hi d.o.g.

Are you vested?

1. Will NAV increase? UOBAM has done a so-so job so far. So the NAV tracks the global economy to a certain extent.

2. Will the NAV discount narrow or widen? Pretty stays the same if you ask me. Directors look certain to stay the course and not liquidate. For a fund of such small AUM, it's really a puzzle. Perhaps more face than anything else.

Found this as I was doing some research - www.uisaction.co.uk

A lot of details and analysis in the website. The risk warning is actually quite interesting. I couldn't figure it out the first time and had to try a second time. (To enter the site, answer 'yes' to shareholder, answer 'no' to location)

[d.o.g.]

Fundamentally Laxey has confused the "correct" thing to do with the "profitable" thing to do. The "correct" thing to do is, as they suggest, to encourage UOB to open-end or liquidate UIS, thus eliminating the discount. Alternatively UOB can be persuaded to have UIS aggressively buy back or tender for its own shares, also reducing the discount. The "profitable" thing to do, however, is to sell and walk away.

On the "UIS action" website, Laxey posted several examples of closed-end funds that did the "correct" thing. They forgot that with the exception of those that had continuation clauses built in (fixed life, minimum AUM etc) the closed-end funds that open-ended, liquidated or tendered for their shares were doing so voluntarily. And in order for such voluntary actions to happen you need to convince the board of directors. Which in turn means you do not automatically waltz in, assume the moral high ground and try to dictate to the board what you think they should do. Especially when there is a controlling shareholder with 49% of the votes.

IMHO Laxey's UIS plan is a lost cause. They cannot hope to win by vote since Wee Cho Yaw controls 49% of the votes. They cannot hope to win by embarrassing Wee Cho Yaw any more, due to their rude behaviour at the recent EGM which would have turned many retail shareholders against them. So they can kick up all the fuss they want, but they are not going to make any money out of UIS. In fact I think it is quite likely that Wee Cho Yaw will wait until Laxey gives up and sells at a loss before considering any of the proposals (which will improve shareholder value).

The Laxey-UIS case is very similar to the current Kingboard Copperfoil saga, where Pope Asset Management blocked the interested party transactions with Kingboard Laminates and is suing to have the books examined by an independent auditor. The bad blood created means that Kingboard Laminates is almost definitely going to wait until Pope gives up and sells at a loss before taking any actions to improve shareholder value at Kingboard Copperfoil.

The "correct" thing to do for minority shareholders is to support Laxey and Pope. The "profitable" thing to do is to stay away until these activist shareholders have given up and sold out at a loss, and only then, reexamine whether it is worthwhile to buy in on the basis that the controlling shareholder may now do something to improve shareholder value. While these activist shareholders are present, it is unlikely that the controlling shareholders will do anything to improve shareholder value, as it could be seen as rewarding belligerence.

Simply stated, if Laxey or Pope win, the controlling shareholders will have lost "face" which would not be acceptable.

[brattzz]

waos, quite a lousy situation to be in... WCY can well afford to wait out till laxey sells out at major discount, buy all in, and liquidates! just to show laxey was "wrong!"

:O

[valuenewb]

Thanks d.o.g.
Thanks brattzz

d.o.g.,
I don't think market has the depth to absorb the 10% if Laxey wants to get out. Were you at the EGM in Aug?

[d.o.g.]

I don't think market has the depth to absorb the 10% if Laxey wants to get out.

That is precisely the point. Laxey will have to take heavy losses when it exits, either via a controlled selldown over several months, or a married deal with Wee Cho Yaw. Given the current state of affairs between the 2 parties, an open market exit is more likely.

Of course, Laxey can also choose to hang on to its shares and mark them at the last done price. That would avoid the markdown, but it would be lying to its investors about the true realizable value of the UIS stake since there's no way it can sell 10% of the company at the last done price just like that. Size matters, and in this case it's a big minus. This is actually the most likely case IMHO since UIS is probably a small part of Laxey's portfolio.

As long as Laxey is still on the shareholder register it's unlikely Wee Cho Yaw will do anything for UIS minority shareholders. But Wee Cho Yaw can wait...

FWIW Laxey is trying similar stuff at London-listed Alliance Trust, see:

https://www.atstaction.co.uk/

[valuenewb]

I don't think market has the depth to absorb the 10% if Laxey wants to get out.

That is precisely the point. Laxey will have to take heavy losses when it exits, either via a controlled selldown over several months, or a married deal with Wee Cho Yaw. Given the current state of affairs between the 2 parties, an open market exit is more likely.

Of course, Laxey can also choose to hang on to its shares and mark them at the last done price. That would avoid the markdown, but it would be lying to its investors about the true realizable value of the UIS stake since there's no way it can sell 10% of the company at the last done price just like that. Size matters, and in this case it's a big minus. This is actually the most likely case IMHO since UIS is probably a small part of Laxey's portfolio.

As long as Laxey is still on the shareholder register it's unlikely Wee Cho Yaw will do anything for UIS minority shareholders. But Wee Cho Yaw can wait...

FWIW Laxey is trying similar stuff at London-listed Alliance Trust, see:

https://www.atstaction.co.uk/

Thanks d.o.g.

At least for Alliance, management 'woke' up and did several things. I guess Laxey is trying to get WCY to do something, anything. The BOD frankly is WCY's best pal, less the NUS professor.

Come'on, if they think that UOBAM is doing a good job, then publish the benchmark and let shareholders decide.

In any case, anybody will be there on Weds?

www.uisaction.co.uk

[freedom]

from UIS' recent portfolio update(July 2012), it seems that UIS has liquidated most of its UOB shares and UOB is no longer the biggest equity position of UIS, but CapitaMall Trust.

an interesting development, a sign of UIS to improve its valuation?

[propertyinvestor]

Laxey Partners seems to be divesting some UIS shares. Hopeless company with no real desire to unlock value. Another of your favourite "value traps".