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Follow Up Stock Analysis on Three Companies: WBL, Straits Trading, and UE

My writing intention is to raise market participants awareness on Straits Trading and WBL. This article is meant to get the reader to have better idea of how much both stocks should be worth. I am regretful if there is some degree of deviations from actual results due to unforeseen future circumstances. You, the reader, have your own responsibility to perform due diligent before you make a decision to buy stock. If you have any opinion or clarification on this piece of article, you are welcome to email me at tonydelpiero10@hotmail.com

There is one shocking announcement on the SGX bulletin board on 30 January 2013. United Engineering Limited (UE) created its own subsidiary company, UE CENTENNIAL VENTURE PTE. LTD. on 30 January 2013. The aim of this creation is to acquire the remaining WBL shares at all cash offer of $4 per share. Ironically, WBL owns 7.54% of UE shares. Right now, Great Eastern Life Assurance Co Ltd (GE), Lee family, and OCBC own both WBL and UE shares. OCBC used to own entire GE, WBL, STC, UE, and F&N stocks before MAS require it to divest in order to focus entirely on banking business. When Straits Trading (STC) made announcement of its intention to acquire at least half of WBL shares, UE was alerted. WBL chairman, Norman Ip is also director of UE. Jackson Chevalier Yap Kit Siong, Group CEO of UE discussed with the board of directors and major shareholders. This was confirmed by The Edge who interviewed with Mr Jackson you can find its article on current issue of The Edge. They agree that it is beneficial interest to acquire WBL. It appears that the Business Times article dated 31 January 2013 to be apt to describe that Tan family is to complete Lee family again over WBL. In addition, Norman Ip did a good job keeping mum about UEs action during WBL AGM and acting in the interest of WBL shareholders. Because of his action, WBLs share price appreciates positively. Tan family and Lee family adjusted the offer price per share frequently before Tan family won the control of STC with the highest offer. It happened in few years ago. Now, it is possible that STC and UE will adjust price. It is because it is highly probable that OCBC, who was dissatisfied with STCs offer price, to sell its shares to UE. As STC has only 44.6% control, it is likely to adjust price to achieve more than 50% control on WBL. It will happen if UE acquires enough shares that can be threatening to the STCs plan. Looking at UEs financials, it is really impressive as its reputation is top class such that interested parties can look for UE to build world class environmentally-friendly building and complex electrical wiring. It has three divisions Intellectual Property Services, Construction, and Engineering. Its completed projects include Garden by the bay, Marina Bay Sands, Ngee Ann City, ION Orchard, Resorts World, and etc for different divisions. It is using debt leverage to improve its company performance and its share price. Interestingly, it has construction project at Changi. Changi area will be major industrial area with Expo and shopping centre. The property value for each building at Changi area will rise due to higher traffic and a cluster of firms in few similar related firms, if I am not wrong. With these qualities, it is slightly undervalued based on the current market price. UE has approximately $485 million cash. With debt, it will be able to acquire WBL as WBLs cash $418 million with lower debt load will aid UE to manage its debt cost sufficiently. This tells that WBL is cash cow in the eyes of UE and STC on the Boston Consultancy Group Matrix model (which is taught in postgraduate class). That is precise reason why STC and UE are interested in WBL. WBLs businesses are

more mature and stable than that of STC and UE. With ever-rising price of Certificate of Entitlement (COE), people in Singapore still want to buy cars for greater convenience. Likewise, people in South East Asia will want to own cars even though there is no COE in their countries. In addition, two engineering firms making for consumer related products are stable. That explains why WBL is cash cow which provides large cash flow for STC and UE. That cash flow can be used to resolve their question mark and star divisions of STC and UE. In the case of STC, its mining division is stable but its hospitality isnt that stable. If it does not divest hospitality completely, WBLs cash flow can be handy. In the case of UE, it needs a lot of money to do construction projects as the payments from customers tend to be made on the schedule of the date of each completion phase. With that knowledge, I urge WBL minority shareholders not to sell WBL shares so easily. We should hold out for better share price. It is appropriate to expect its share price to continue to rise on the open market operation. This article I write is written for my benefit as well as the rest of minority WBL shareholders. You have remembered that Tan familys highest offer for STC was $6.70. Please check this history: http://news.asiaone.com/News/The%2BStraits%2BTimes/Story/A1Story20080219-50295.html. It is eerie similar to today situation over WBL shares! In my opinion, WBL shares should be worth somewhat between $5 and $6 for the current situation without upcoming first quarter result, which is schedule to be released this month. My personal opinion is that WBL, STC, and UE shares should be rated as buy as the battle between Tan family and Lee family can be the catalyst for all three shares. Disclosure: I have long position in WBL and STC and no position in UE.