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Why Has United Engineers Limited Surged By 7% In The Morning?


United Engineers Limited (SGX: U04), one of the oldest property, engineering, and construction companies in Singapore, has halted the trading of its shares since 11:13 am today. Interestingly, its shares are up 7.4% to S$2.46 just prior to the halt. No announcements have been made yet by the company, so what’s going on?

Déjà vu

According to a Bloomberg report this morning, three of United Engineers’ main shareholders – Oversea-Chinese Banking Corp. Limited (SGX: O39), Great Eastern Holding Limited (SGX: G07), and the Lee Foundation – might be planning to sell their collective 34.1% stake in the company.

As of the time of publishing (2:31 pm, 21 August 2014), there’s been no official word yet from United Engineers on the matter.

But in any case, OCBC’s Chief Executive Samuel Tsien had previously stated that the bank is looking to sell its non-core assets after the acquisition of Wing Hang Bank in a US$5 billion deal last month. To improve its capital ratios after the acquisition, OCBC is also planning to raise more capital.

After knowing about the sellers, make a guess as to the potential buyer. It is none other than Thai Beverage Public Company Limited’s (SGX: Y92) Chairman, the Thai billionaire Mr. Charoen Sirivadhanabhakdi. The last deal that Mr. Sirivadhanabhakdi had struck with OCBC was when he bought the latter’s stake in Fraser & Neave Limited (SGX: F99) in 2012.

The deal’s not confirmed yet, but at its current halted price of S$2.46 per share, United Engineers is trading at a price to earnings (PE) ratio of 8.5 and a price to book (PB) ratio of 0.88. Currently, most of the company’s revenue is coming from WBL Corporation, in which the company had acquired a 56.8% stake last May. United Engineers has since increased its stake in WBL Corp to 67% this year.

So what’s next?

Although news of the possible sale is already out, there are still many unanswered questions regarding it. Thai Beverage’s investors might also want to watch this – the alcoholic beverage maker is already heavily indebted with THB57.7 billion in total borrowings and THB2.97 billion in cash & equivalents. If Thai Beverage is used as a vehicle by Mr. Sirivadhanabhakdi to participate in any deal involving United Engineers – Thai Beverage was one of Mr. Sirivadhanabhakdi’s investment vehicles for the Fraser & Neave deal – the company’s balance sheet might be weakened further.

But of course, I have to stress that there is no concrete information yet. All investors can do is to wait.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn't own any shares of companies mention above