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IMO, it is highly unlikely. B Semb is likely to remain in current state for a long time coming. They will continue to remain as King of Yio Chu Kang and will take their time to realise the value of freehold landed properties there.

In fact if Lee Family wanted to be aggressive,they would have leverage on B Semb's underlying value and gone the way how UE has been transformed - business hup, mass residential and office buildings. So far, B Semb's focus is limited to landed housing and selected high end developments.

Also vested in B Semb (odd lots and cert)

(02-02-2014, 09:48 PM)wizguy84 Wrote: [ -> ]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.

(31-01-2014, 11:28 PM)greengiraffe Wrote: [ -> ]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

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]

Hi GG,
Very well written and analysed. Will certainly look into this counter.
Many thanks for sharing.

Hi Stocker,

UE's property development exposure in Singapore is fairly limited via 68% owned listed subsidiary UE E&C.

Both Austville and Watercolours 30% owned by UE E&C are fully sold while Waterwoods (30/70 jv with Sing Holdings sold 154 out of 373 - refer to Sing Holdings posting).

The main concern could be the high end 99 year luxury site @ Prince Charles JV with Metro / Wing Tai.

Anyway, an effective 20.4% stake and 13.6% stake by parent UE in the remaining 2 sites appears well affordable especially after booking so much profits from previously successful development projects. Ie development exposure in Singapore appears well ring fence in the event of bears bearing their sharp teeth on the local property market.

Between FCL and UE, I personally think that FCL is a better situational stock with shorter time horizon than UE. UE is likely to be a long term value accumulation and extraction proposition.

Vested
GG

(15-02-2014, 11:01 AM)Stocker Wrote: [ -> ]Hi GG,
Very well written and analysed. Will certainly look into this counter.
Many thanks for sharing.

For record purposes only - Not good news but with 70% sold hopefully UE is off the hook on its only 100% owned property development, 8 Riversuites. Land costs ppr around $774:

http://infopub.sgx.com/FileOpen/AnnBende...leID=64383

Developers sweetening deals to woo home buyers

One project enticing buyers with car deals, another with discounts

Published on Feb 14, 2014

THE GLADES: Prospective buyers at The Glades' showflat in Tanah Merah during its preview in September last year. The 762-unit project has moved about 60 per cent of the 200 units released. -- PHOTO: KEPPEL LAND
EIGHT RIVERSUITES: An artist's impression of the Whampoa project, which is more than 70 per cent sold.  -- PHOTO: UNITED ENGINEERS


By Cheryl Ong

DEVELOPERS appear to be becoming nervous about the slowing property market, with at least two projects dangling sweeteners to stir interest among wary buyers.

Market watchers tip that other developers will make similar moves to stir buyers into action.

United Engineers has been running a "promotion" for the three-bedroom loft units, penthouses and townhouse units at its Eight Riversuites condominium in Whampoa East since November.

Buyers who snap up a three-bedder can choose to take home a Renault Fluence car at a discount - understood from agents to be $10,000 - off the market price of about $131,000.

Penthouse buyers can opt for a discount off the Volvo S60, which has a market price of about $210,000, or a Volvo XC60 that could cost about $240,000.

Townhouse buyers can get discount on a Jaguar XF, with a market price of about $240,000 to $260,000.

Eight Riversuites is more than 70 per cent sold, at an average price of $1,300 per sq ft (psf).

Three-bedroom units of 1,195 sq ft are selling for about $1.4 million, while a penthouse of 1,453 sq ft costs around $1.88 million. A townhouse measuring 2,820 sq ft will set a buyer back $2.75 million.

The Straits Times understands that the car discounts could vary at the discretion of car dealer Wearnes Automotive and will depend on the car model.

United Engineers, which acquired Wearnes Automotive in May, said it sees the promotion as "beyond just generating sales, but more as a co-branding opportunity".

Developer Keppel Land has joined the fray, and is offering discounts for some one- and two-bedders at The Glades condominium in Tanah Merah.

Discounts vary from $48,000 off the price of a one-bedroom unit that starts from $690,000, to an $88,000 discount for a two-bedder that could cost from $780,000.

Property agents said at least three such units have been sold after the promotion started at the end of last year.

Keppel Land also threw in a Chinese New Year "hongbao" treat over the festive period, offering a discount of $4,800 on a one-bedder, $8,800 on two bedroom units, $12,800 on a three-bedder and $16,800 on a four-bedder or penthouse unit at the project. The 726-unit development has sold about 60 per cent of the 200 homes released.

Experts said buyers can expect developers to dangle more carrots as it has become clear from recent launches that cheaper units were the first to fly off the shelves as buyers get wary amid cooling measures and economic uncertainty.

"We can expect, before serious price discounting starts, to see more freebies, say in terms of furniture vouchers, rental guarantees, stamp duty rebates," said Century 21 chief executive Ku Swee Yong.

PropNex chief executive Mohamed Ismail said such promotions can prompt undecided home buyers to make a move.

Developers are not restricted when offering such incentives. However, the Monetary Authority of Singapore pointed out that any rebates, discounts or benefits must be deducted from the unit's purchase price before arriving at the loan amount that can be granted to a borrower.

Experts also cautioned that buyers should look beyond discounts and also consider older properties that could be in better locations which provide "better value".

Buyers should also ensure they are getting a direct discount on the purchase price instead of freebies that do not bring down the price, noted Mr Ismail.

ocheryl@sph.com.sg

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

I am quite positive about UE, i think their major shareholder OCBC would definitely want UE to divest their automotive and electronics business. Eventually UE will need unlock asset values and then to send cash to Ocbc and in turn minor shareholders will benefit too

A friend of mine highlighted this interesting observation about UE's shareholding structure by OCBC/GE/Lee group of holders. Excluding the WBL cross holdings (before adjustment for cancellation), if we take deemed interests to eliminate overlapping shareholdings as noted in the deemed interests footnote, the entire related group only control less than 28% of the now combined UE/WBL group.

Should some corporate raiders decide to mount an offensive on UE, surely the combined group may have to put into defensive mode given that they have already put WBL into UE.

Vested
GG

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

Pg 37:

(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 [i][u][b]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 beneficial interest of The Overseas Assurance Corporation Limited)[/b][/u][/i]; 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 beneficial 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 beneficial 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 beneficial 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).

(17-02-2014, 11:36 PM)felixleong Wrote: [ -> ]I am quite positive about UE, i think their major shareholder OCBC would definitely want UE to divest their automotive and electronics business. Eventually UE will need unlock asset values and then to send cash to Ocbc and in turn minor shareholders will benefit too

Why would they allow that? One way is for UE to issue shares to WBL shareholders to exchange into UE the parent company - which is entirely possible given that UE is unlikely to come up with more cash? That will add onto OCBC / GE / Lee holdings in UE, strengthening their hold on the group. However, to be fair to UE minorities the valuation of the exchange should be at (or nearby) UE's book value against WBL's book value.

That's my rudimentary understanding of the possible share exchange mechanics. Otherwise they can just leave things be for the next ten years.

It is probable that consideration about corporate raiders prompted the group to issue the recent rights issue at such a low price. It was pretty clear that market conditions more than warranted a much higher price.
Effectively the right exercise has allowed them to narrow the gap between market price, and intrinsic value, making it less attractive for hostile bids.

Of course minority shareholders have really been played out.

Having said that, UE is considerably undervalued.