OCBC/G.Eastern/United Engineers

OCBC/G.Eastern/United Engineers: Approached by a party for a possible transaction for their combined stakes in UEL and WBL, which may or may not lead to an offer for the shares of UEL and WBL. This comes after Bloomberg reported that OCBC was in talks to sell the combined stake in UEL owned by OCBC/GE/Lee family to Thai billionaire Charoen. UEL shares shot up 7.4% before a trading halt yesterday. OCBC CEO Samuel Tsien had earlier this week mentioned that it would look to divest non-core assets post the $6.2b purchase of Wing Hang bank to shore up capital. As a guide, the recently announced rights issue looks to raise $3.36b. We believe that the deal will more likely than not go through as: 1) OCBC has had good follow through when it announced past stake sales (e.g. FNN) 2) Since UEL’s previous CEO Jackson Yap’s retiring in January, there has been no replacement to-date 3) Potential investor may be eyeing redevelopment opportunities for WBL’s car showrooms As at 10 Mar '14, OCBC, Great Eastern and the Lee family holds an aggregate 33.4% stake in United Engineers, and a sale by these related parties could trigger the 30% takeover rule. UEL is currently trading at 0.9x P/B