United Engineers

United Engineers: to acquire the commercial property known as 79 Anson Road from the CPF and 79 Anson Pte Ltd for $410m, or $2,029 psf NLA. This compares with Colliers recent valuation at $430m. The property is a Freehold 23 storey building with 202k sf located within the CBD. It was completed in 1992 and renovated in 2010. The property is currently 99% tenanted, and its anchor tenant is Kellogg Brown & Root Asia Pacific. UE will rename the property to UE BizHub Tower. The acq is inline with UE’s strategy to build on a more stable base of rental income to smoothen its fluctuating development profits. Based on FY11 numbers, the acq will be slightly earnings accretive, lifting EPS to 98.3cts from 97.3cts. Incidentally, Maybank KE initiates at Buy with TP $4.18, a 25% discount to RNAV. Notes UE is a long undervalued company, with an invmt property portfolio worth $1.7b, and could now be on the brink of a major transformation to unlock shareholder value. Major sh/h OCBC owns a 24.5% stake in UE, and OCBC in recent months has been active in realizing value from its other invmts in FNN, APB, and potentially WBL. All eyes are now on UE, which is the last remaining piece of the OCBC jigsaw. Other catalysts incl redevelopment of its key asset UE Square, and possibly a sale of its hospitality assets.