United Engineers will be sold sooner than you think

OUE, Straits Trading and Charoen are just amongst the potential buyers.

United Engineers (UE) is gearing up for sale and the sale is an eventuality rather than a possibility said UOBKayHian.

The research house cited four main reasons to support its view.

First, UOBKayHian said that major shareholders OCBC and Great Eastern have already announced that they are “strategically reviewing their stake. "A sale of 30% or more will trigger  a mandatory offer," it noted.

Secondly, the vacant CEO position is evidence of a non-operational status, it said.

Third, UOBKayHian said that the series of non-core assets sales simplifies UE’s business, transforming it into a “pure” property play (including hard-to-value technology manufacturer, Mflex that was previously loss-making).

Lastly, there are willing seller and numerous potential suitors for UE.

"Bloomberg highlighted OUE as a suitor (though OUE stated that there were no ongoing discussions then, implying a wait) and we would not be surprised if cash-rich China funds are interested," it said.

The research house also said that there is also a possibility that Straits Trading may revisit its interest, while the previously interested buyer, Charoen, cannot be overlooked as well.

According to UOBKayHian UE (or its properties) will likely to be sold above book, regardless of who the buyer might be.

"From a property perspective, we note that the previous sale of its UE BizHub EAST was sold considerably above valuation. From a stake perspective, we view OCBC as a demanding
seller that is unlikely to sell below book. As evidenced from its previous transactions, where all assets were sold comfortably above book," it said.