United Engineers

[kbl]

UE E&C 6months EPS 9.1cts but net asset per ordinary share $0.77. I think UE likely to *milk* UE E&C>increase of dividend payout by UE E&C for the next few yrs?

me waiting for Fatlady to sing for Sing Holdings

http://www.youtube.com/watch?v=_U8ksG7TP5Q

[ngcheeki]

Article on UE from Business Time today!!

UNITED Engineers' real estate deals in the past 12 months seem puzzling to the casual observer trying to fathom its strategy. A clearer picture emerges when one takes a closer look at the developments taking place at the company.

Last December, the group acquired 79 Anson, a 23-storey freehold office building in the CBD, for $410 million.

In July this year, UE announced a conditional deal to divest UE BizHub East, a mixed-use development in Changi Business Park, for $518 million to the proposed Viva Industrial Trust. UE will continue to manage the business park and retail space in the development after the sale, and provide rental income support for five years. It will also keep operating the hotel in the development.

UE has the option to subscribe for 5 per cent of the stapled group comprising Viva Industrial Reit and a business trust proposed to be listed. The group has also been granted the right to subscribe for a 10 per cent stake each in the Reit manager and the trustee-manager of the business trust. That announcement also revealed that UE will grant Viva the right of first refusal (ROFR) for the purchase of UE BizHub Central in Ang Mo Kio.

This week, the group said it is buying Hewlett-Packard's freehold property on Alexandra Road for $402 million in a sale-and-leaseback deal.

Why is UE selling some properties and buying others? If it is keen on investing in a Reit, why does it not spin off its own Reit? Is there any order in all this?

A study of UE's portfolio and buying pattern may shed some light on the group's probable strategy.

The assets UE is, or could, be divesting - UE BizHub East and UE BizHub Central - are short-tenure leasehold assets. UE BizHub East is on a site with a balance lease term of about 25 years of its original 30-year term, although there is an option for a 30-year lease extension. The mixed-development project - which includes business park, retail, exhibition and convention space and a hotel - was completed last year and valued at $293 million at end-2012. UE has estimated the net gain from the proposed divestment at $86.7 million after making provision for shortfall in the net rental income commitment for the property given by UE, and transaction costs. Assuming not all of the rental income support is tapped, UE's final gain could be higher.

It makes sense for UE to sell this newly-built asset, having realised its current development potential and with an eye to reaping a nice profit.

UE BizHub Central in Ang Mo Kio, which UE could potentially sell to Viva Industrial Trust under the ROFR, is on a site with a remaining lease of about 31 years. UE acquired the property from Motorala in 2010 for $25.18 million, which it partially leased back to Motorola. Apple is also now a tenant in the building while UE's headquarters are also located there. Property market watchers point to the substantial development potential of this asset if its huge surface carpark is built into industrial space and suggest it would be a fair bet that if and when UE offloads this asset, it would be after securing approvals for the development scheme - as this value-addition would help it secure a higher price.

One could ask why UE is contributing assets to a third-party Reit instead of spinning off its own Reit?

Well, the group has a diversified property portfolio but lacks sufficient critical mass in any one particular property segment to assemble a Reit focused on a single-asset class, which typically would be more appealing to investors.

Or may be, having witnessed the mixed bag of results for Singapore Reit flotations, the group could be quite contented to realise a handsome gain from selling projects it has developed to third-party Reits and then reinvesting the monies in new properties. It may feel the S-Reit space is getting overcrowded with over 30 Reits/stapled groups.

The 79 Anson and HP properties UE has bought will produce steady rental income in the interim and their freehold tenure means time is on UE's side as it mulls options for their redevelopment in the longer term as the government fleshes out plans for the nearby Southern Waterfront City. Redevelopment will also create spin-offs for UE's construction and engineering arms.

Looking at all these transactions in perspective, one could say UE is swapping shorter lease assets for freehold assets near Singapore's southern stretch earmarked for rejuvenation. Like any other listed company, UE is trying to recycle capital and boost its bottomline.

UE has not been participating in Singapore residential land tenders for some time - probably a wise move given the slowdown in new home sales after the total debt servicing ratio framework was introduced in late June.

Its recent takeover of WBL Corp also opens the door for a China property play. With about 56 per cent of WBL, UE has gained immediate presence in the property markets of five major Chinese cities - Shanghai, Suzhou, Shenyang, Chongqing and Chengdu. Most of WBL's projects in these cities will be completed in the next two or three years, which could potentially boost UE's bottomline and cashflow.

http://www.cpf.gov.sg/imsavvy/infohub_ar...7165600060}

[David]

UE E&C 6months EPS 9.1cts but net asset per ordinary share $0.77. I think UE likely to *milk* UE E&C>increase of dividend payout by UE E&C for the next few yrs?

me waiting for Fatlady to sing for Sing Holdings

http://www.youtube.com/watch?v=_U8ksG7TP5Q

Just curious, wouldn't them increasing the dividends from UE E&C benefit all shareholders?

[ngcheeki]

1. With the successful listing of Viva REIT, UE BizHub East has been successfully completed. The completion of the deal will mean UE will recognize a gain of 86.7 mil or 28 cents per shares. The gain will reflect in their Q4 FY2013 result.

http://infopub.sgx.com/FileOpen/Ann_Dive...eID=246866

2. UED has also subscribed for a 10% stake in each of Viva Industrial Trust Management Pte. Ltd. (“VITM”), being the manager of the REIT.

3. UE has also taken up 5% or 29.7 mil share of the Viva REIT @ 78 cents per share. The total amount invested in the REIT was S$23.16 mil

4. The investment in REIT and REIT's manager is funded by internal resource and will not have any impact on the NTA and EPS.


http://infopub.sgx.com/FileOpen/Divestme...eID=262517

Vested

[greengiraffe]

Hopefully the following article is not a mere spin story but actions that will sharpen UE back to its original core before the expensive takeover of WBL.

Vested
GG

UE hires bank to value Wearnes' auto portfolio

JP Morgan tasked with valuating firm's newly acquired businesses

Published on Jan 30, 2014

Wearnes’ automotive portfolio includes makes such as Jaguar (above). Potential buyers of the auto businesses are said to include billionaire Peter Lim and Hong Kong’s Swire Pacific group. -- ST FILE PHOTO

By Christopher Tan Senior Correspondent

UNITED Engineers' review of newly acquired WBL Corp's (Wearnes') businesses has shifted to a higher gear.

It has hired investment bank JP Morgan to carry out a valuation of its automotive portfolio.

"They are really serious now," said an insider. "Before this, it was just talk."

The Straits Times understands the bank has arrived at a preliminary figure of $300 million for the fixed assets and inventory, although it is unclear if land is included in that figure.

United Engineers refused to comment on the latest development, but sources said the investment bank's brief was broader than just the motor businesses.

Wearnes' technology business is also slated for divestment - a plan on the cards even before UE came into the picture.

Meanwhile, potential buyers of the auto businesses are said

to include billionaire Peter Lim and Hong Kong's Swire Pacific group. The latter has motor businesses in Taiwan, while the former has a substantial stake in the manufacturer of McLaren sports cars.

Observers have all but ruled out motor giants present in Singapore, including the likes of Jardine Cycle & Carriage, Sime Darby and Inchcape - primarily because of brand conflict.

Wearnes' automotive portfolio includes Bentley, Bugatti, Infiniti, Jaguar, Land Rover, McLaren, Renault and Volvo. These are in competition to brands like Mercedes-Benz and BMW, represented by Jardine C&C and Sime, respectively.

DMG & Partners analyst Goh Han Peng said United Engineers is "more of a property company".

"I think if they get a good price, they are set to divest."

But he said United Engineers may want to hold on to the land on which Wearnes' showrooms sit, given the probability in the long term that the parcels may be converted to residential use.

Industry players, however, said no one will want to buy the auto portfolio without the premises, as these are hard to come by.

They also said local motor companies would want to look outside Singapore to hedge against the cyclical nature of the local market.

On that front, Mr Goh of DMG said: "Their (Wearnes') overseas presence is small but growing."

Wearnes recently acquired a BMW dealership in Johor Baru. Wearnes Autohaus in Tebrau Johor is a 63,000 sq ft one-stop centre for BMW cars and motorcycles, as well as Mini cars.

It also entered into a joint venture in Hanoi to import and sell Bentley and Lamborghini cars. The US$5 million (S$6.4 million) start-up represents Wearnes' maiden Lamborghini dealership, and its third Bentley franchise in South-east Asia.

Mr Andre Roy, chief executive of Wearnes Automotive, said: "Our growth strategy is focused on the region, to partially offset the volatility and growth restrictions created by the certificate of entitlement system in Singapore."

christan@sph.com.sg
- See more at: http://www.straitstimes.com/premium/mone...fgm0g.dpuf

[egghead]

Could UE be looking at separate listing of the auto business instead of divesting it?

[HitandRun]

Could UE be looking at separate listing of the auto business instead of divesting it?

Possible too, but unlikely.

Several months ago, I heard that UE is offering to sell some of the businesses within the Engineering and Distribution BU. At the same time, some bankers, that I have spoken to recently, admitted that UE is looking for buyers for some parts of their business. The overall theme appears consistent with a divestment strategy.

[greengiraffe]

ANNOUNCEMENT – CLARIFICATION IN RELATION TO AN ARTICLE PUBLISHED
BY THE STRAITS TIMES ON 30 JANUARY 2014
The Board of Directors of United Engineers Limited (the “Company” or “UE Group”) refers
to the article published by The Straits Times on 30 January 2014 titled “UE hires bank to
value Wearnes’ auto portfolio” and wishes to inform its shareholders that as stated in the
Exit Offers Letter to WBL Corporation Limited’s shareholders dated 14 January 2014, the
Company may from time to time review opportunities with respect to its business group.
This is carried out as part of the ongoing review strategic options to enhance or maximise
its shareholder value. As of the date of this announcement, no decision has been
reached on any specific options. Shareholders are advised to refer to WBL’s Circular
dated 14 January 2014 in relation to the proposed voluntary delisting of WBL Corporation
Limited for further details about the WBL Group, in particular, its businesses and
activities.
J.P. Morgan was the financial advisor for the take over of WBL Corporation Limited, which
was concluded on 29 May 2013.
Shareholders are advised to refrain from taking any action in respect of their shares in
the Company which may be prejudicial to their interests, and to exercise caution when
dealing in the shares of the Company. An announcement will be issued by the Company
in the event that there are any material developments.
BY ORDER OF THE BOARD
Heng Fook Pyng, Jeslyn
Company Secretary
30 January 2014

[greengiraffe]

On 30 Jan 13, UE was "chosen" by OCBC/GE/Lee Family to defend Straits Trading failed GO attempt on WBL Corp. UE led consortium started the offer @ $4.15 and successfully gain control of WBL @ final offer price of $4.45 (xd).

Based on UE rights document:

http://infopub.sgx.com/FileOpen/UEL-OIS....leID=19170

UE paid a total of $712.2m in return for a 56.8% stake in WBL. UE raised a net proceeds of $454m via a 1-for-1 rights @ $1.50 to lower gearing associated with WBL takeover.

Noted that OCBC/GE/Lee Family continues to maintain their substantial stake in soon to be delisted WBL (probably costs very little to them as it is a historical legacy stake). For OCBC/GE, as WBL stake can be considered as in compliance with MAS requirements for non-core, they can choose to do nothing.

Interestingly UE is their other "non-core" listed investments that was chosen to champion the defence and consolidation of WBL stake.

UE was trading in excess of $2.25 (XR basis) at the time of the WBL offer and discount to latest reported book value of $2.70 (3Q13).

It is quite obvious that UE has paid quite a high price (current share price of $1.74) to win the WBL battle. Analysts coverages (CIMB & Maybank KE) also ceased following the announcement of rights.

Based on the latest WBL delisting exit offer documents:

http://infopub.sgx.com/FileOpen/WBL-Deli...leID=20100

The deemed non-core business divisions that UE could be looking to offload could be worth at least S$600m, almost half of the lower end of WBL breakup value of $4.41 and very closed to UE's final offer of $4.45xd. The automotive distribution unit that was reported by Straits Times yesterday and the listed technology companies of MFlex (57% owned US listed) and MFS (77% owned SGX listed).

Straits Times reported a value of $300m for Auto Distributions (not clear if it includes fixed assets like show-room that has been separately valued under others in the exit circular).

At the lower end of the breakup value, the listed stakes of Mflex and MFS are also being valued at the lower end as both companies are facing tough times (either making big losses or very little profits). Fortunately, both Mflex and MFS are sitting on very healthy net cash piles to tide them through severe times in the PCB manufacturing industries. Given the cyclicality of electronics industry, it is not hard to foresee a good opportunity to offload manufacturing assets at good prices (especially the listed ones with good historical records) once the turnaround is evident. Hence, IMO, I think given time both listed stakes should conservatively return WBL another $300m.

As said in my opening paragraph, UE paid a high price taking over WBL (a diversified conglomerate with very odd business units) whose share price has underperformed for a long time till the bidding war emerged.

Any steps to realise the odd divisions at WBL will once again sharpened UE's focus back to property and related engineering. With solid backing by OCBC/GE, the current price of below $1.80 (slight premium over the recent rights of $1.50) but steeply below reported book value of $2.70 appears to be a good long term bet. Whilst veteran banker Wee has his UOB-UOL connections, UE may just turn out to be a replica of UOL in the years ahead.

Vested
GG

[wizguy84]

just thinking if there could be any synergy between UE and bukit sembawang, cause the lee family has been holding bukit sembawang for a very long time too.

Whilst veteran banker Wee has his UOB-UOL connections, UE may just turn out to be a replica of UOL in the years ahead.

Vested
GG