UEL buys Anson Road block for $410m

Firm's first commercial property in CBD will provide stable rent income

Published on Dec 18, 2012

By Magdalen Ng

INFRASTRUCTURE firm United Engineers (UEL) is buying a commercial block in Anson Road for $410 million.

The company has acquired the 23-storey property from the Central Provident Fund Board and fellow owner 79 Anson.

The block, known as 79 Anson Road, is linked to Tanjong Pagar MRT station and was valued by Colliers International at $430 million.

It is 99 per cent occupied, with technical consultants Kellogg Brown & Root Asia Pacific the anchor tenant.

UEL shares surged 18 cents, or 6.2 per cent, to $3.09 apiece yesterday after the announcement.

Maybank-Kim Eng said it had initiated coverage on the stock, with a target price of $4.18.

Analyst Alison Fok from Maybank-Kim Eng noted that UEL, which has an investment property portfolio valued at $1.7 billion, has long been undervalued but is now on the brink of a major transformation to unlock its worth.

"OCBC owns a 24.5 per cent stake in UEL, and we believe that it holds the key to UEL's quest to unlock value," said Ms Fok.

"In recent months, OCBC shareholders have given the nod for the sale of the group's two long-term investments, Fraser & Neave and Asia Pacific Breweries.

"On WBL Corporation, another of its investments, OCBC stood aside in the hope that Straits Trading Company and its partners could hasten the unlocking of its value."

Ms Fok added that the Urban Redevelopment Authority will review the masterplan for Singapore next year. This could mean an increase in plot ratio and perhaps the opportunity for UEL to redevelop UE Square, its key commercial asset in the city area.

UEL said in a statement yesterday that the Anson Road acquisition, which will be its first commercial property within the central business district, will provide a stable rental income with potential to increase rates.

It added that there is potential for capital growth given the property's location near the port land - at Tanjong Pagar, Keppel and Pulau Brani - which has been earmarked to become a waterfront city.

This deal also helps UEL build up a more stable base of rental income to smoothen its fluctuating development profits.

UEL, which formed the wholly owned unit UE Development (Anson) to make the transaction, said the purchase is not expected to have a material impact on the earnings per share and net tangible assets per share for this financial year.

[email protected]