Discover how much Thai tycoon Charoen Sirivadhanabhakdi is likely to pay for OCBC’s UEL shares

He’s a savvy investor who will not overpay for assets.

OCBC filled the headlines last week after it revealed that it is looking to sell its stake in Mainboard-listed construction firm United Engineers Limited. The prospective buyer is Thai billionaire Charoen Sirivadhanabhakdi, who has a history of takeovers in SGX-listed companies.

According to a report by CIMB, Charoen could be attracted to UEM’s investment properties
worth S$2bn, and there is a high likelihood of this transaction coming true.

When it comes to the question of how much the tycoon is going to pay for the shares, CIMB notes that Charoen’s recent F&N takeover demonstrates that he is a savvy investor who will not overpay for assets.

“Based on the past M&A transactions in the property space at average ~0.8x P/RNAV, we estimate that Charoen could pay 0.8-0.9x RNAV for UEM. This translates into S$2.54-2.85/share for UEM, implying 3-16% upside from the previous price. At 10% discount to RNAV, we estimate that Charoen will pay ~S$1,300 per sq ft for the office assets, still fairly attractive compared to the average capital value of ~S$1,500 per sq ft for the secondary office assets,” noted CIMB.

Here’s more from the report:
Motivated buyer and seller. Our banking analyst informs us that OCBC is a motivated seller as it seeks to divest its non-core assets to boost capital ratios. Charoen, on the other hand, could be attracted to UEM’s investment propertiesworth S$2bn, according to our estimates.

In the long term, the assets offer enhancement potential. Although the discussions are still at an early stage, we think that there is a high likelihood of this transaction coming true.

However, if a takeover offer do not materialise, we expect UEM’s to de-rate to ~30% discount to RNAV. In our view, the potential upside of 3-16% in a takeover offer is lower than the historical premium of >20% and may not justify the potential downside risk.

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