Why UOL's swap deal with Haw Par is strategic

It will enable UOL to acquire a significant minority interest in UIC.

UOL recently announced an option agreement with Haw Paw Corporation under which it will issue additional shares for the latter in exchange of increased stakes in UIC.

According to OCBC Investment Research, UOL’s interest in UIC will increase from 44.71% to 48.94%.

Analyst Eli Lee said this move makes strategic sense, as it will enable UOL to acquire a significant UIC minority interest which is otherwise not available given the lack of trading liquidity.

"More importantly, from our analysis, the transaction will be accretive for UOL, which will deepen its effective ownership stake in desirable UIC assets, such as Singapore Land Tower and Marina Square, that it already understands well," Lee noted.

Moreover, as the domestic housing market draws closer towards a cyclical bottom, Lee said this will boost UOL’s local residential exposure through UIC’s condominium projects.

"This is positive particularly as land tenders in Singapore continue to be competitive, with many cash-rich developers, both local and foreign, vying to replenish their dwindling land-bank amidst improving buyer sentiments," the analyst explained.