SINGAPORE (May 21): Substantial shareholders of United Engineers have been steadily increasing their stakes on the open market. This has nudged the share price of the century-old property, engineering and manufacturing company to its highest level this year.
Yanlord Perennial Investment (Singapore), the investment vehicle led by United Engineers’ executive chairman Zhong Sheng Jian, paid an average of $2.72 for 685,600 shares on May 10, bringing YPI’s stake to 33.86%, from 33.75%. Zhong, better known as executive chairman of another listed entity, Yanlord Land Group, had bought 200,000 shares on May 8 at $2.68 each.
Oxley Holdings, which is controlled by executive chairman Ching Chiat Kwong, has been steadily increasing its stake in United Engineers as well. Oxley pulled a surprise last August when it emerged as a substantial shareholder of the company. In an Aug 4 filing, United Engineers said Oxley had bought nearly 8.9 million shares at an average price of $2.64, thereby raising its stake from 3.94% to 5.33%. The following day, it bought another tranche of nearly 11.4 million shares at $2.69 apiece, further increasing its stake to 7.11%.
The emergence of Oxley at United Engineers came just as Zhong and parties in concert with him, including Perennial Real Estate Holdings, were assuming formal control of United Engineers, following the sale of shares by long-time shareholders OCBC and Great Eastern Holdings at $2.60 each.
Between August and December last year, Oxley more than doubled its stake via open market purchases to 16.04% as at Dec 6. Its most recent purchase of nearly 1.53 million shares was made on May 7 at an average price of $2.67. This brings Oxley’s stake so far to 17.02%. On top of this, Eric Low See Ching, deputy CEO and another substantial shareholder of Oxley, has a personal stake of 1.08% in United Engineers, giving him a total deemed and direct interest of around 18.1% in the company.
Oxley’s presence at United Engineers has already created some tension. Both Ching and Low attended the company’s annual general meeting on April 28, at which they asked for board representation but were rebuffed by the board of directors. At an extraordinary general meeting on Feb 23, minority shareholders, including Oxley, had blocked YPI’s bid to sell its stake in WBL Corp to United Engineers.
On May 7, United Engineers reported a modest 3% y-o-y rise in earnings to $9 million for the first quarter ended March 31. Revenue in the same period was down by a marginal 1% to $105.2 million. As at March 31, the company’s net asset value (NAV) per share was $3.11, up slightly from $3.08 as at Dec 31, 2017.
In its 1QFY2018 earnings commentary, United Engineers says it sees an improved economic outlook, which will presumably be positive for the Singapore property market. “The group intends to embark on asset enhancement initiatives for its investment properties in Singapore and may make selective acquisitions if and when such opportunities arise,” the company states.
As for its property business in China, United Engineers sees a slowdown because of government-imposed cooling measures. Nevertheless, it expects demand for good-quality housing to remain and, as a result, for growth to be sustained in the longer term.
On March 29, the company announced the next phase of the Shanghai Olympic Garden project in Jiuting. Phase 3.2 is estimated to have a gross development value of about RMB3 billion ($631 million). It is expected to comprise 517 units of low-rise apartments, with a total saleable gross floor area of 52,889 sq m. Construction is slated to begin in 2H2018 and be completed by end-2021.
In addition to United Engineers shares, Zhong has been steadily buying shares in his flagship Yanlord as well. The most recent purchase was made on March 12, when he spent more than $1.27 million to buy 712,800 shares. This brings his combined direct and deemed interest to more than 1.32 billion shares, or 68.78%. The purchase price works out to an average of $1.79.
On May 14, Yanlord reported a 15% y-o-y dip in earnings to RMB797.1 million, on the back of a 14% y-o-y increase in revenue to RMB7.2 billion. As at March 31, Yanlord’s NAV per share was RMB12.36, up from RMB11.77 on Dec 31, 2017. This prices Yanlord shares, which closed on May 15 at $1.69, at a substantial discount to their book value.
