Shares of UE E&C fell as much as 3.5% in early trade today after its parent United Engineers agreed to sell the construction company to a private equity firm at a price below its last closing price.
At 2:53 p.m. Singapore time, the stock traded at $1.23, below the price of $1.25 a share offered last Friday by an investment holding company owned by Southern Capital Group, which intends to delist UE E&C if the takeover goes through.
Malaysia-based Southern Capital’s offer is a 2.3% discount to UE E&C’s last closing price of $1.28.
It is also 2.9% lower than the stock’s volume-weighted average price during the six months before the acquisition was announced.
The proposed takeover of UE E&C comes at a time when construction companies in Singapore are lamenting reduced profit margins as labour costs go up.
For the three months ended June 30, UE E&C’s gross profit margin fell to 19.7% from 25.2% a year earlier.
“This move does not come as a surprise to us and it is in line with United Engineers’ actions of late,” CIMB analyst Tan Xuan said in a note.
“The company has been divesting its non-core property assets. We believe the voluntary offer paves the way for the potential takeover by Thai tycoon Charoen Sirivadhanabhakdi, who is eyeing United Engineers’ property portfolio.”
Despite the current pullback in UE E&C’s shares, selling activity is not rampant as volume is thin.
Immediate support for the share price is seen at its September low of $1.175.
Shares of United Engineers, which owns 68.2% of UE E&C, traded at $2.84, up 0.4%, at 2:53 p.m. Singapore time.
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