What makes United Engineers attractive for acquisition targets?

Major shareholders are looking to sell it out.

United Engineers, an established centennial Singapore company with key businesses, will be subject to a potential takeover as major shareholders look to exit, said DBS Vickers Securities.

Major shareholders, OCBC, Great Eastern and affiliates, have announced a potential sale of their combined stake of c.32% of the stock, which will spark a general offer, based on SGX listing rules.

"We believe UE will be of interest to prospective acquirers given the group’s strong recurring income and well-positioned assets – UE Bizhub City (UE Square), One North mixed development, as well as UE Bizhub West which are strategically located at the fringe of the Central Business District (CBD) or in key suburban commercial districts," it said.

DBS Vickers Securities believes that potential acquirers might include listed developers, private property funds or overseas developers looking to increase their footprint in Singapore.

What's in it for acquirers?

Apart from acquiring a commercial portfolio that sits on substantially FH/999-LH land and upside to earnings through active leasing of empty spaces, DBS Vickers Securities believes that more capital is needed to be spent to spruce up the portfolio in order to remain relevant to tenant needs. This, it said, could point to higher values in the medium term.

The research firm, however, cautioned about the following risks: lacklustre sales and lease for the China projects, Chengdu Orchard Villa and Shenyang Orchard Summer Palace.