UE E&C

UE E&C: Despite the stock’s 60% ytd gain this year, Maybank-KE notes in an unrated report, that UE E&C is still trading at dirt cheap valuation of 1.9x ex-cash P/E. The construction firm has consistently outperformed its peers with its strong ROE and has given consistent dividend payout since listing in 2011. The house estimates that UE E&C could pay up to 6-7 cts in FY14 (vs FY12 of 5 cts), which translates to a 6.3% to 7% yield. UE E&C holds a construction orderbook of $650m, consistent with its past 3 yr historical avg of $595m. This does not include the construction contract from its 80/20 JV stake with Wing Tai for Prince Charles Crescent, which it is likely to secure in future. UE E&C has since repositioned itself as an ideal Executive Condo contractor. It promises a fixed construction cost, and often takes equity stakes in the project. UE E&C holds a 30% stake in two ECs, Watercolours and Austville Residences, which have been fully sold and will receive TOP in FY14. As a catalyst, UE E&C recently launched EC Waterwoods in Punggol with bookings expected to close in Nov. Maybank-KE estimates UE E&C can book ~$15m for this project separately in FY16, assuming ASP of $790 psf.