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Wednesday, 16 February 2011

UE E&C Ltd

UE E&C Ltd ("Company") is offering 70m shares (subject to over-allotment) where 60m will be via placement and 10m via public at $0.48 each. The Company is an established mechanical and electrical engineering and construction company, capable of providing integrated solutions and in recent years, have participated in the HDB design, build and sell scheme and Executive Condo through minority JV stakes. According to the prospectus, it has order books worth $631.8m and the orders will be fulfilled over the next 12-36 months. The offer will close on 22 Feb at 12pm but it has been a long while since we last saw OCBC doing an IPO. I don't think the 'track record' for a stag is there even though OCBC has tried to structure an 'over-allotment' option of 10.5m shares to help stabilize the post IPO share price. The market cap based on post IPO shares of 270m stands at S$129.6m

Audited revenue from FY2007-FY2009 rose from $249.6m to $398.4 and the net profit attributable also rose from $7.4m to $29m. First half 2010 revenue showed a slight increase to $184.4m and net profit is 11.4% marginally higher than the previous 1H2009.  Assuming the company is able to achieve its 2010 results in the same proportion as 2009 where 2nd half turns in a better results than the first half, the EPS adjusted for the dilution will be 12.25 cents and that will translate into a listing PER of 3.91x. 

It is interesting to note that companies continue to be priced at such a low PE for an IPO, no wonder not many companies keen to be listed here, especially the cashflow rich companies. This is a critical issue that SGX should seek to address if it wants to attract better companies.

Personally while the IPO is cheaply priced, it is quite "garang" to go out into the market under such poor market sentiments. Perhaps it wants to rush its IPO before the Hutchinson business trust sucks up all the liquidity in our small market.  I would give it a miss based purely from the fact that i dont like the industry/sector which it is in. Perhaps a low PE is warranted.


Jason Tan said...

It looks like the market is improving today, I think it will start to stabilize again within this next few days. I've worked for a small M&E company for over 15 years and understand the business quite well. I do believe that there's lots of potential in this industry and that 2011 will be a good year.

I'm not sure about UE, but for our company we received quite a lot of jobs from semiconductor companies in the 4th quarter of 2010, we're currently carrying out these project and we'll probably receive more payments by mid year.

The market is mostly based on human nature after all, it always get better overtime. So I think it's quite good if we can get these shares while the price is still on the lower side.

I'll definitely try to get some offer shares.

Thanks for your blog by the way! I visit it regularly to check on updates.

2Y Capital said...

Jason, thanks for the comments!

Eric Yap said...

I think this is a good discount now at $0.46

The underwriters negotiated for $0.48 when STI was at about 3080 points (Feb 11 to Feb 18).

Current the STI is at 3158 points (Apr 5, 12:23) and UE E&C Ltd is only trading at $0.46

Tan Tong Yam said...

It went as low as $0.305. At almost PE 2, it is a catch. Forget not the parent company is the 100 years old United Engineers! Their revenue generator is Greatearth Construction and since building and construction industry is still heading north, there is no reason why I would not buy its share.

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