SINGAPORE (Aug 16): Lim & Tan Securities is maintaining its “hold” recommendation on United Engineers as it does not expect the takeover offer to succeed.
SAC Capital the independent financial adviser to the independent directors of United Engineers in their evaluation of the takeover offer by Perennial Real Estate Holdings and Yanlord Land Group has concluded that the offer price of $2.60 per share is “fair and reasonable”.
See: Yanlord to join Perennial in bid for United Engineers
According to SAC Capital, after considering the liquidity of the stock, the balance sheet of United Engineers and using their sum-of-the-parts calculation, it has come up with a fair value range of between $2.36 to $3.12. UE’s latest NAV is $3.02.
However, Lim & Tan notes that UE’s market price has stayed consistently above the $2.60 offer price since the takeover announcement.
In addition, the offer price values UE below its price to book at 0.89x. There is also potential for the consortium to create value over the middle and longer term and there is still the possibility of a counter bid from Oxley Holdings
See: Oxley acquires 7.11% stake in United Engineers but will not be making competing offer
“We note that Oxley Holdings has been increasing their stake in UE in the past few weeks and currently hold 9.02% of the company.”
Shares in UE closed at $2.69 on Wednesday.
