Trading halt of 3 firms fuels rally of property stocks

City Development's South Beach mixed-use project in Beach Road. The firm's shares shot up 2.5 per cent, or 27 cents, to $10.92 - their highest level since May 2014, as investors snapped up property counters.
City Development's South Beach mixed-use project in Beach Road. The firm's shares shot up 2.5 per cent, or 27 cents, to $10.92 - their highest level since May 2014, as investors snapped up property counters.PHOTO: CITY DEVELOPMENTS

Many property counters rose yesterday after the trading halt of three property firms substantially owned by tycoon Wee Cho Yaw stoked talk of a possible restructuring - such as possible privatisation.

Investors piled into City Developments, sending its shares up 2.5 per cent, or 27 cents, to $10.92 - their highest level since May 2014.

Wheelock Properties, GuocoLand, United Engineers and Oxley Holdings also rose given cheap valuations. Firms or people with cash are likely to look at taking over or delisting undervalued stocks.

Trading of UOL Group, its associate United Industrial Corp (UIC) and investment holding firm Haw Par Corp was halted on Wednesday pending an announcement.

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There is unsubstantiated talk that UIC may be taken private if Mr Wee can buy out Philippine tycoon John Gokongwei's 37 per cent stake. UOL owns about 45 per cent of UIC. Haw Par has a sliver too.

"If UOL is taking over UIC, that could mean other undervalued property counters may follow suit. And even if they don't get privatised, many are trading way below book value," Mr Justin Tang, director of global special situations at Religare Capital Markets, said.

Speculation of the possible privatisation of UIC also stoked trading interest in property group United Engineers, whose major shareholders are said to be mulling over block sales of their stakes. It gained 0.7 per cent, or two cents, to $2.78.

Wheelock Properties jumped 1.6 per cent, or three cents, to $1.895, as it is among potential buyout candidates trading below book value. Far East Orchard rose 2.52 per cent to $1.63 before it ended at $1.585.

"People are trying to spot the next undervalued stock that could turn out to be another UIC," a remisier said.

Analysts say UIC could be the company being taken private because its free float, or outstanding shares not owned by the majority shareholder, is fairly low. "So the speculation is that restructuring may have to do with a potential offer for shares of UIC," Maybank Kim Eng analyst Derrick Heng said.

Feel-good sentiment on property counters will likely remain ahead of the trio's announcement which investors are keenly awaiting today.

"The way land prices are being bid, developers are implying they believe property prices will recover in the next few years. Sales transaction volumes have also been quite healthy," DBS analyst Rachel Tan said. "All this suggests developers see a positive trend in Singapore's property outlook, and there may likely be more potential future mergers and acquisitions or privatisation of smaller property firms."

A version of this article appeared in the print edition of The Straits Times on June 23, 2017, with the headline 'Trading halt of 3 firms fuels rally of property stocks'. Print Edition | Subscribe