The financial performance of United Engineers (UE) painted a less-than-rosy picture of the property sector. In the second quarter, revenue dipped 8 percent from $96.2 million to $88.1 million. This can be attributed not only to a weak performance from the property segment but also reflects poorly on the engineering and manufacturing segments as well.

Owing to the above, 2Q net profit attributable to shareholders fell 33% to $7.7 million from $11.4 million a year ago.

Looking at the breakdown revealed that the property development segment suffered a 32 percent fall in revenue &ndash the largest single contributor to the lacklustre performance &ndash while manufacturing, a victim of the trade war, dipped 20 percent. The engineering segment saw a 12 percent decline in revenue.

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UE SHARE SALE RAISES DOUBT

 

 

Early July, the board of United Engineers (UE) came to a decision to sell all its treasury shares to undisclosed third parties, fetching a sum of $56 million. The transaction, facilitated by UOB Kay Hian, represented a meaningful stake of 3.14 percent of the company. 

The move, however, drew scrutiny from its second largest shareholder Oxley Holdings (Oxley) and raises questions by minority shareholders alike. Oxley, which has built one of Singapore&rsquo s most successful brands in property development, was not sounded out as a potential buyer and was not offered the option to take up the block sale.

Expressing dismay, Oxley Chief Executive Mr. Ching Chiat Kwong said that he would have seriously considered &ldquo giving a reasonable price that helps the company (UE) achieve better ground&rdquo . 

For purpose of context, in 2017, a consortium (YPI) led by Yanlord Land Group and Perennial Real Estate Holdings tried to take over of UE, but only managed to snap up 33.5-percent stake. Since then, YPI had control of board but differences with Oxley arose when the latter also became a substantial shareholder of UE in 2017 as well. 

Drawn to UE&rsquo s assets, Oxley has continued to build up its stake in the company. As of June 2019, Oxley has accumulated 18.9 percent in UE. Along with its executives Mr. Ching and deputy CEO Mr. Eric Low, Oxley&rsquo s direct and indirect interest combined to about 23.5 percent of UE. Despite that, Oxley has been unsuccessful in getting any of its executives on the UE board even after two appeals by Mr. Ching. Why? This raises serious doubts about whether UE is an entity that bothers about the rights of its minority shareholders, and we are talking about a minority that holds a very substantial amount of shares in the company.

Also leaving retail and minority investors feeling high and dry was UE&rsquo s decision to go on a separate placement of its entire block of treasury shares at a price of $2.58 per share. In 2017, minority shareholders had voted against the YPI&rsquo s offer price of $2.60 per share, leading to the takeover offer to lapse.  Following which, YPI cannot increase its stake in UE by more than one percent every six months, unless it embarks on another general offer. 

The latest episode thus left investors wondering if the move was YPI&rsquo s strategy to accumulate an increased stake in UE via a third party who could end up being acting in concert hence the secrecy.  Regardless, it also dented confidence in the current UE board. Looking at the public forum of Sharejunction, most forumers seem to show some distaste for the sale.