UE E&C

OCBC on 24 Sept 2012

A consortium comprising Wing Tai’s Wingstar Investment, Metro Australia Holdings and UE E&C’s Maxdin put in a top bid of S$516.3m, or S$960 psf ppr, for a 99-year leasehold residential site at Prince Charles Crescent, beating the next closest bid by a mere 1.45%. Based on our estimates, the break-even price for the new development would be around S$1,450 psf ppr and the selling price S$1,650 psf ppr. We also expect UE E&C to provide construction services (worth an estimated S$150-200m) for the new development. We expect URA to announce the winning bid in the coming weeks. In the meantime, we are keeping our projections and S$0.71 fair value estimate unchanged. Maintain BUY.

Top bid for leasehold site
A consortium comprising Wing Tai’s Wingstar Investment, Metro Australia Holdings and UE E&C’s Maxdin put in a top bid of S$516.3m, or S$960 psf ppr, for a 99-year leasehold residential site at Prince Charles Crescent, beating the next closest bid by a mere 1.45%. The second and third highest bids were from Intrepid Investments, Verwood Holdings and Hong Realty (S$508.9m) and Keppel Land’s Sherwood Development (S$488.2m). Given that both Wing Tai and UE E&C are established players within the local property industry, we believe the Wing Tai – Metro - UE E&C consortium should have a high chance of winning. We also estimate UE E&C’s stake in the JV to be around 20-30%, similar to its previous development projects.

Estimated selling price of S$1,650 psf
Based on our estimates, the breakeven price for the new development would be around S$1,450 psf ppr and the selling price S$1,650 psf ppr. We note that units in the nearby Ascentia Sky condominium are also fully sold and transacted around S$1,500 psf ppr. As the new development is located within District 10, unlike Ascentia Sky in District 3, a price premium could be achievable.

S$150-200m in construction services
Like its previous property projects, we expect UE E&C to provide construction services (worth an estimated S$150-200m) for the new development. Recall that the group’s order-book looked weaker in 2Q12 as majority of its projects are due for completion within a year. Supposing the consortium wins the bid for the leasehold site with UE E&C providing construction services, UE E&C’s project pipeline for 2H13 and 1H14 should be lined up nicely.

Maintain BUY with S$0.71 unchanged FV
We expect URA to announce the winning bid in the coming weeks. In the meantime, we are keeping our projections and S$0.71 fair value estimate unchanged. Maintain BUY.