United Engineers

United Engineers: 3Q14 net profit improved 47% y/y to $18.5m, bolstered by a 7% revenue jump to $786.3m, as United Engineers (UE) saw higher revenue recognition from its residential property development- Eight Riversuites. Meanwhile, rental income improved 14% to $59.2m from new contribution of UE BizHub WEST, acquired in 4Q13, which partially offset lower technology and automotive sales from 67.6%-owned subsidiary, WBL Group. Overall, gross profit margin improved to 16.2% (+3.4 ppts) as a result of the positive turnaround of 43%-owned Multi-Fineline Electronix. However, bottom line was dragged by the absence of a disposal gain on available-for-sale financial assets, $3m impairment charge on an environmental engineering plant in China, partially offset by revenue recognition from its property development JV with UE E&C. Meanwhile, the $230m divestment of its 68.2% stake in UE E&C, through a voluntary conditional offer by Southern Capital group, a private equity firm, remains in the works, with an EGM scheduled on 28 Nov. This would pave the way for a potential sale of UE's property assets, comprising six wholly-owned mixed investment properties in Singapore, as well as seven properties under development in Singapore, Malaysia and China. The group disclosed that substantial shareholders- OCBC and Great Eastern, still remain in talks for its aggregate 20.5% stake in UE. Notably, both parties have entered into an exclusivity agreement with TCC Top Enterprise in relation to a potential transaction, and the 6-week period will expire after due diligence access is granted. At $2.88, UEL valued at a 13% discount to consensus RNAV of $3.30, based on property valuations as at Dec 2013.