Singapore Companies
Published June 28, 2006

UOL Group is now Wee's property vehicle: CLSA
CLSA expects UOL to divest its stake in UIC or privatise Hotel Plaza


WATCHERS of UOB chairman Wee Cho Yaw's property market moves could expect further action following UOB's divestment of Hotel Negara to the UOL Group last week, CLSA says in a report.

In recent years, Mr Wee Has been accumulating shares in UOL and now holds a deemed interest of 26.4%, excluding the current 11.7% stake held by the UOB Group.

CLSA foresees two potential moves, the first involving a divestment of UOL's 12.3 per cent stake in UIC and the second a privatisation of Hotel Plaza, of which UOL already owns 78 per cent, it says.

The UOL Group 'without a doubt, is now the property vehicle of choice for Wee Cho Yaw. In recent years, chairman Wee has been accumulating shares in UOL and now holds a deemed interest of 26.4 per cent, excluding the current 11.7 per cent stake held by the UOB Group,' CLSA notes. Adding the fact that UOB had in late May divested its entire 55 per cent controlling stake in hotel and property group Overseas Union Enterprise (OUE) to foreign consortium Lippo Property Investment, 'this means that UOL is clearly chairman Wee's property vehicle of choice, by default, since OUE was the only other major property asset he has', it says.

As for UIC, both Mr Wee and major shareholder John Gokongwei have been upping their stakes and 'a divestment of this UIC stake to the highest bidder might be in the offing'.

Hotel Plaza, on the other hand, is a 'very illiquid cash-rich hospitality company' that complements UOL's plans to grow in the hospitality segment, as evidenced by its increased stakes in three hotels around Marina Bay and the redevelopment of the UOL Building into a small office, home office (Soho) service apartment.

UOL has been accumulating Hotel Plaza shares in the open market and with management saying that the share price is right for repurchasing, there is a 'real possibility' that UOL will privatise the group, CLSA said.

Meanwhile, other analysts said the Hotel Negara sale - though positive for both buyer and seller - has minor impact on UOB's earnings and they look towards other activities such as regional diversification and capital management for improved shareholder value. The Daiwa Institute of Research, which revised its earnings per share forecast for 2006 by 1.4 per cent to $1.66, said it has not changed expectations for UOB to declare a 40-cent special dividend, which would mean a distribution of some $490 million. It also expects a $500 million share buyback using the divestment proceeds and reiterated its 'hold' call on UOB, with a six-month $15.60 price target.

The key to higher earnings for UOB lies in better revenue and profit performance from its recent acquisitions, said Citigroup.