United Engineers

[greengiraffe]

Big volume in UE today when you can literally hear a pin drop for the rest of the market. VB forum that influential?

[CityFarmer]

Big volume in UE today when you can literally hear a pin drop for the rest of the market. VB forum that influential?

Don't underestimate the influential of the forum.

I have no evident to support the view, but I do have the "feel" that there are quite a number of people getting tips from our forum, not small fishes, but institutional investors.

[greengiraffe]

I was reviewing UE's shareholding structure over the weekend:

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

The entire OCBC/GE/Lee Family alliance appear to only control around 27.5% stake of UE excluding the diluted (undecided fate of) WBL's legacy crossed holdings in UE.

A friend was highlighting that UE is possible the last known legacy OCBC/GE non core holdings. Given its substantial holdings of property assets (now inclusive of WBL's China property developments), does any buddies think that the loose shareholdings in UE may appeal to corporate raiders or asset strippers?

Vested
GG

On page 37 listing substantial shareholders -

(1) OCBC Bank is deemed to have an interest in:
(a) 59,449,514 Stock Units, of which 38,054,663 Stock Units were held by The Great Eastern Life Assurance
Company Limited, 10,040,791 Stock Units were held by Oversea-Chinese Bank Nominees Pte Ltd, 8,110,208
Stock Units were held by The Overseas Assurance Corporation Limited, 3,235,852 Stock Units were held by
The Great Eastern Trust Private Limited, 2,000 Stock Units were held by United Overseas Bank Nominees Pte
Ltd (for the benefi cial interest of The Great Eastern Life Assurance Company Limited), 2,000 Stock Units were
held by United Overseas Bank Nominees Pte Ltd (for the benefi cial interest of The Great Eastern Trust Private
Limited) and 4,000 Stock Units were held by Citibank Nominees Singapore Pte Ltd (for the benefi cial interest of
The Overseas Assurance Corporation Limited); and
(b) 602,800 Preference Shares, of which 535,207 Preference Shares were held by The Great Eastern Life
Assurance Company Limited, 41,357 Preference Shares were held by The Great Eastern Trust Private Limited,
11,000 Preference Shares were held by Oversea-Chinese Bank Nominees Pte Ltd, 9,236 Preference Shares
were held by The Overseas Assurance Corporation Limited, 2,000 Preference Shares were held by United
Overseas Bank Nominees Pte Ltd (for the benefi cial interest of The Great Eastern Life Assurance Company
Limited), 2,000 Preference Shares were held by United Overseas Bank Nominees Pte Ltd (for the benefi cial
interest of The Great Eastern Trust Private Limited) and 2,000 Preference Shares were held by Citibank
Nominees Singapore Pte Ltd (for the benefi cial interest of the Overseas Assurance Corporation Limited).
(2) GEH is deemed to have an interest in:
(a) 49,408,723 Stock Units, of which 38,054,663 Stock Units were held by The Great Eastern Life Assurance
Company Limited, 8,110,208 Stock Units were held by The Overseas Assurance Corporation Limited,
3,235,852 Stock Units were held by The Great Eastern Trust Private Limited, 2,000 Stock Units were held
by United Overseas Bank Nominees Pte Ltd (for the benefi cial interest of The Great Eastern Life Assurance
Company Limited), 2,000 Stock Units were held by United Overseas Bank Nominees Pte Ltd (for the benefi cial
interest of The Great Eastern Trust Private Limited) and 4,000 Stock Units were held by Citibank Nominees
Singapore Pte Ltd (for the benefi cial interest of The Overseas Assurance Corporation Limited); and
(b) 591,800 Preference Shares, of which 535,207 Preference Shares were held by The Great Eastern Life
Assurance Company Limited, 41,357 Preference Shares were held by The Great Eastern Trust Private Limited,
9,236 Preference Shares were held by The Overseas Assurance Corporation Limited, 2,000 Preference Shares
were held by United Overseas Bank Nominees Pte Ltd (for the benefi cial interest of The Great Eastern Life
Assurance Company Limited), 2,000 Preference Shares were held by United Overseas Bank Nominees Pte Ltd
(for the benefi cial interest of The Great Eastern Trust Private Limited) and 2,000 Preference Shares were held
by Citibank Nominees Singapore Pte Ltd (for the benefi cial interest of The Overseas Assurance Corporation
Limited).
(3) Dr Tan Kheng Lian, The Tan Chin Tuan Foundation and Grange Investment Holdings Pte Ltd (BVI Company) are
deemed to be interested in the 69,000 Preference Shares held by Kambau Pte Ltd.
(4) The Tan Chin Tuan Foundation is the benefi cial owner of 7,700 Preference Shares held by Tecity Management Pte
Ltd.

[thefarside]

I was reviewing UE's shareholding structure over the weekend:

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

The entire OCBC/GE/Lee Family alliance appear to only control around 27.5% stake of UE excluding the diluted (undecided fate of) WBL's legacy crossed holdings in UE.

A friend was highlighting that UE is possible the last known legacy OCBC/GE non core holdings. Given its substantial holdings of property assets (now inclusive of WBL's China property developments), does any buddies think that the loose shareholdings in UE may appeal to corporate raiders or asset strippers?

Vested
GG

Hi GG - since this is the 2nd time you are raising this I guess you are really interested in this theory. I would ask that you read UE's rights issue document and see how much the OCBC/GE/Lees own of UE prior to the rights issue. Its about 34%. The Lee portion is not just the Lee Foundation piece - you need to consider those owned by their various company vehicles (including those that does not appear in the top 20 shareholders list) and family members.

From that you can see the WBL's 7% block of UE shares is a very important one for them as it is the largest non-concert, immediately friendly block outside of the controlling shareholder structure. With this block they would be 40+% before any raiders try to corner the rest of the equity. An unassailable position I think, until now. And CGK certainly took time with this but did kick them in the nuts eventually for messing around with her when she wanted to take Straits Trading back in 2007 - what she did with WBL was masterly and eventually the forced UE rights issue effectively dismantled this block that the Lee group has relied on to protect UE.

OCBC/GE could no longer raise their shares beyond current level by buying from market as they are constrained by MAS regulations. UE itself is too cash constrained to buy back shares. Not sure what the Lees will do.

However for raiders to take on UE they will have to find a few large, friendly blocks to give them a flying start before they mount the offer. UE's shareholding structure is somewhat disparate, and I don't think such blocks exist outside of the OCBC/GE/Lee group. Morph etc don't count. For that, I do think they are safe for the time being.

[greengiraffe]

I was reviewing UE's shareholding structure over the weekend:

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

The entire OCBC/GE/Lee Family alliance appear to only control around 27.5% stake of UE excluding the diluted (undecided fate of) WBL's legacy crossed holdings in UE.

A friend was highlighting that UE is possible the last known legacy OCBC/GE non core holdings. Given its substantial holdings of property assets (now inclusive of WBL's China property developments), does any buddies think that the loose shareholdings in UE may appeal to corporate raiders or asset strippers?

Vested
GG

Hi GG - since this is the 2nd time you are raising this I guess you are really interested in this theory. I would ask that you read UE's rights issue document and see how much the OCBC/GE/Lees own of UE prior to the rights issue. Its about 34%. The Lee portion is not just the Lee Foundation piece - you need to consider those owned by their various company vehicles (including those that does not appear in the top 20 shareholders list) and family members.

From that you can see the WBL's 7% block of UE shares is a very important one for them as it is the largest non-concert, immediately friendly block outside of the controlling shareholder structure. With this block they would be 40+% before any raiders try to corner the rest of the equity. An unassailable position I think, until now. And CGK certainly took time with this but did kick them in the nuts eventually for messing around with her when she wanted to take Straits Trading back in 2007 - what she did with WBL was masterly and eventually the forced UE rights issue effectively dismantled this block that the Lee group has relied on to protect UE.

OCBC/GE could no longer raise their shares beyond current level by buying from market as they are constrained by MAS regulations. UE itself is too cash constrained to buy back shares. Not sure what the Lees will do.

However for raiders to take on UE they will have to find a few large, friendly blocks to give them a flying start before they mount the offer. UE's shareholding structure is somewhat disparate, and I don't think such blocks exist outside of the OCBC/GE/Lee group. Morph etc don't count. For that, I do think they are safe for the time being.

Hi Buddy,

Thanks for the heads up on the 34%. I think a better way to see the shareholdings of the other family is via the 2012 annual report not from the rights issue circular.

1 thing we agree is that OCBC/GE can no longer raise their stakes in UE due to MAS ruling.

As WBL is currently a 67% own subsidiary of UE, the diluted WBL stake of 3.5% (since they sold their rights) will have to be resolved within a certain time frame.

In addition, contrary to many expectations, UE's gearing while looking excessive at first glance is actually backed by projects in progress that will result in cashflow over time.

Interesting to see Capital Intelligence on the top 20 as well.

GG

[greengiraffe]

http://infopub.sgx.com/FileOpen/VIT_4Q13...eID=275938

VIVA just released its latest report to 31 Dec 13 (Page 16):

Occupancy now stands at 84% vs 64.2% at ipo. Should augur well for UE as rental support provider - though assumptions on occupancy and rental rates were not previously revealed in VIVA propspectus... hence difficult to quantify.

Vested UE
GG

I had a chance to review the financial engineering that UE engineered at the inception of VIVA REIT. Whether you like UE is besides the point but its certainly a case studies for those who are kay poh:

Selling Price of Bizhub: S$518m
Book value: S$288m

Gains before rental guarantee (business & retail space) to VIVA: S$230m
Less 5 Year rental guarantee (as follows): S$135.3m
Less Others: S$8.0m
Reported Gains to be booked: S$86.7m or EPS: $0.14

Net rental guarantee for year 1 - 2: S$26.0m pa
for year 3 - 4: S$27.3m pa
year 5: S$28.7m

Total over 5 years: $135.3m. This represents deferred income for UE over next 5 years should VIVA achieve the targeted occupancy levels. In fact, if VIVA exceed the guaranteed levels, they will have to refund UE the surplus, ie VIVA unit holders will get S$135.3m over the next 5 years (no more no less).

http://infopub.sgx.com/FileOpen/Viva%20I...ileID=4065

Pg 107 of Viva Prospectus (Dec Year End):

For UE BizHub EAST, the REIT Manager has projected rental arrangement of S$7.5 million for Forecast Period 6 Months 2013, S$13.4 million for Projection Year 2014, and S$13.2 million for Projection Year 2015 for the Business Park Component and Hotel Retail Areas.

Based on the full year projections for FY14 & 15, it appears that UE is off the hook for about 50% of the guarantee support for first 2 years. Hence we can safely assume a write back of at least 50% of $135.3m or S$67.65m in total for next 5 years. Annually that is about $13m or EPS $0.021.

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

UED has the option of selling the 10% stake in VITM and the holding co of VITM after 12 months but before 36 months post the listing of Viva REIT. The costs of the stakes totalled $0.8m while the sale price at $4.0m, representing a gain of $3.2m or 400% net.

As for the hotel at the Bizhub, UE will pay a flat annual rental of $8.66m for full opeartions for the first 5 years.

Vested
GG

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

[/quote]

[LionFlyer]

http://infopub.sgx.com/FileOpen/Q4_2013_...eID=276947
http://infopub.sgx.com/FileOpen/Q4_2013A...eID=276946

Nice set of results although not unexpected.

Net profit $118 million compared with $72.2 million
EPS 24.5 cents compared with 20 cents last year

5 cents ordinary dividends
2 cents special dividends
7.5 cents dividend for preference shares

Vested. Again. (sold last May year when they announced the WBL deal at $2.95, got myself reinvested back to UE again this year )

[greengiraffe]

http://infopub.sgx.com/Apps?A=COW_Corpor..._Final.pdf

On surface, UE ($1.82) reported a set of highly confusing set of results after taking on Whole Bloody Losses following a hard fought battle to control WBL. After the retirement of Jackson and no visible head at the helm, the key massage for the highly diversified conglomerate appears to be well summaried as follows:

As part of the Group’s on-going review in relation to its operations, the Group will continue to explore and capitalise on opportunities across all businesses to further unlock shareholder value.

I have reused my recent template to try and analyse UE's hidden strength especially in the light of the steep discount to latest reported book value of $2.84.

Net Debt of $1.97bn against total equity of $1.71bn (improvement - Positive)

i) Net assets of disposal group classified as held for sale - $299m
turnkey project for OCBC/GE for the redevelopment of former Specialist Centre

http://infopub.sgx.com/Apps?A=COW_Corpor...un2010.pdf

ii) Property held for sale - $1609m comprising

a) effective 55.5% owned EC development Austville (developed with 68% owned subsidairy UE E&C). Austville is fully sold @ $690psf and is estimated to gross S$379m (100%) to be completed in 2014;

http://infopub.sgx.com/Apps?A=COW_Corpor...kangEC.pdf

b) 100% owned 8 Riversuites that is currently reported to be 70% sold @ $1300psf. Todate sales should be worth $638m. 8 Riversuites is expected to be completed 2016;

http://infopub.sgx.com/Apps?A=COW_Corpor...pr2011.pdf

c) balance could be attributed to WBL's China property holdings.

iii) Inventories also ballooned from $4.7m to $303m - I m just wondering if it is largely due to accounting for WBL's automotive stockpile.

iv) Investment properties worth $1.87bn

v) Plant, property and equipment ballooning from $164m to $782m.

IMHO, the situation is not as bad as compared to 3Q13 by year end.

Given that OCBC/GE/Lee family (collectively controlling around 34% based on 2012 AR top 20 holders analysis) appeared to have chosen UE as their preferred vehicle to fend off S Trading's overtures for WBL and the fact that both OCBC/GE and some remaining Lees continued to hold 33% of the delisted WBL, we certainly can count on a bunch of conservative bankers to restructure and unlock value of a highly confusing conglomerate.

Another indication of work-in-progress following the highly controversial take is on page 18 and 21 of the results release where WBL divisional breakdown continued on its own and UE segmental analysis comprised of WBL as a standalone entity as opposed to integrating into UE's core divisions.

Perhaps, UE is waiting for a better time when non core at WBL are being realised before streamlining the core divisional breakdown.

Vested
GG

http://infopub.sgx.com/FileOpen/Q32013An...eID=264301

UE had a net debt position of $2.06bn as of 3Q13 against total equity of $1.6bn after the rights issue and takeover of WBL. Its little wonder why many analysts ceased coverage after the high profile battle against Straits Trading.

Is UE taking too much risks? IMHO, I certainly do not share the view. I think the OCBC backed group has probably done their sums especially in consultation with their conservative bankers.

There are 2 significant assets worth analysing before conveniently classifying UE as gungho:

i) net assets of disposal group classified as held for sale;
ii) properties held for sale.

Part i) worth about $523m is the easiest to understand and comprises:

a) disposal of Bizhub East

http://infopub.sgx.com/Apps?A=COW_Corpor...040713.pdf

b) turnkey project for OCBC/GE for the redevelopment of former Specialist Centre

http://infopub.sgx.com/Apps?A=COW_Corpor...un2010.pdf

Part ii) worth $1.4bn is a little more complex and comprises:

a) effective 55.5% owned EC development Austville (developed with 68% owned subsidairy UE E&C). Austville is fully sold @ $690psf and is estimated to gross S$379m (100%) to be completed in 2014;

http://infopub.sgx.com/Apps?A=COW_Corpor...kangEC.pdf

b) 100% owned 8 Riversuites that is currently reported to be 70% sold @ $1300psf. Todate sales should be worth $638m. 8 Riversuites is expected to be completed 2016;

http://infopub.sgx.com/Apps?A=COW_Corpor...pr2011.pdf

c) China landbank owned by WBL's China development arm, Huaxin International:

http://infopub.sgx.com/FileOpen/WBL%20AR...ileID=3521

Extract from WBL 2012 Annual Report Property Division Outlook (Page 33):

• Continue to focus on the successful execution of on-going projects –
Chengdu Orchard Villa, Shenyang Orchard Summer Palace and Suzhou
Horizon Manor, for the next three to five fiscal years.
• Continue to explore opportunities to expand our land bank in cities where
we already have a presence.

Landbank around major China cities and their indicative progress are available from Page 30 - 32.

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

The attractiveness and hidden value of WBL's China property business can be better appreciated from the latest circular to WBL shareholders on the proposed voluntary delisting:

i) Page I-9 indicated a range of S$452m to $487m for the Revalued NTA of the property business
ii) Appendix V-7 to V-11 provided detailed revaluation surplus of the China property business by capital cities and by their different phases.

WBL's China property business, however, is a lumpy division as profits are booked on completion.

Huaxin International has an excellent track record in the China property market spanning the last 2 decades. With several projects expected to be completed in the next two to three years, UE can expect good contributions from Huaxin. However, forecast of the quantum of contributions may prove to be difficult given the lack of analysts following and disclosure historically from WBL and likely to be similar trend from UE.

As previously indicated, UE is likely to divest WBL's automotive and electronics division to streamline its focus back to the core engineering and property divisions (with an added established China arm in Huaxin).

Until then, UE's gearing will remain elevated until its capital intensive development projects complete and sell off.

Vested
GG

[Behappyalways]

Took a glance at the FY2013 results.....Looks kinda bad to me......(maybe that's that why Jackson left.....which is why no replacement after his 'planned' retirement)

Profit increased was due to divestment gain. Interest expense of $32m with debts of $2.9b. That's about 1% interest. Most probably interest expense will rise significantly in FY2014 and eats into the P/L.

My guess is UE will probably have lower profit this year and maybe close to breakeven or loss....Just a guess.

They need to cut down on debts fast.....

not vested

[johnnydash]

Wrong to say profit increased was due to divestment gain. UE segments were all profitable, whereas for WBL, the automotive, EMD were profitable.

Take a look at operating cash flow to have an idea of how cash generating the business is.

Of course I would be first to admit that UE overpaid for WBL. But then again if they did not, there would not be a chance to acquire UE at 0.4 RNAV. Plus I think the real crown jewe in WBL l is the property division with significant tracts of land.

I have no doubt UE is looking to sell non core business to pare down debt. Other completed property development and in particular Orchard gateway will also provide significant chunk of cash.In fact there might even be more acquisition of buildings for rental

Took a glance at the FY2013 results.....Looks kinda bad to me......(maybe that's that why Jackson left.....which is why no replacement after his 'planned' retirement)

Profit increased was due to divestment gain. Interest expense of $32m with debts of $2.9b. That's about 1% interest. Most probably interest expense will rise significantly in FY2014 and eats into the P/L.

My guess is UE will probably have lower profit this year and maybe close to breakeven or loss....Just a guess.

They need to cut down on debts fast.....

not vested