United Engineers (UE)

United Engineers (UE): CIMB gives its view on the WBL takeover offer by UE. House think the objective could be for the Lee-family to wrest control of WBL from STC. Wary of price weakness for UE if a bidding war pushes the offer above S$5.15, in house SOTP estimate of WBL. Meanwhile, maintain Outperform rating and TP of $3.59 (30% disc to RNAV), adding that UE is still a strong investment property play with potential for accretive divestments. Add that there are limited synergies btwn UE and WBL, and offer could be a negative for UE if not for the relatively low valuations that WBL is trading at. UE’s offer is at a 19% premium to STC’s offer and 14% premium to the last traded price prior to STC’s offer announcement. House would not be surprised if STC comes up with a counter bid. Think the objective could be to buy another 11.8% stake for majority control, worth $130m, is not a strain on UE’s balance sheet, while buying the remaining 61.7% stake would cost S$687m. House doubt STC will accept the $4 offer. Overall, cute that UE is still a strong investment property play (>70% of GAV) and see potential for accretive asset divestments and redevelopment of old assets. The stock in play is in no doubt, WBL