UDL poised to benefit from major projects
THE new airport project and Lantau Port gives construction company UDL Holdings bright prospects.
The company has expanded considerably in the 1990s, tripling its dredging fleet in the past few years, while simultaneously squeezing out Gitanes, its major local competitor. Its growth came too late to catch much of the airport works, but it is well prepared for Container Terminals 10 & 11.
In 1991, UDL had about 70 vessels. With over 200 vessels and 60 per cent of Hong Kong's capacity, it is now big enough to pick up major contracts.
It will not be short of jobs to tender for. Lantau Port will be worth $65 billion between 1996 and 2011, marine work on the Kai Tak redevelopment will cost about $8 billion, completion of the Central-Wanchai reclamation another $3 billion, and the Green Island reclamation a further $3 billion.
UDL needs to spin-off its marine division by November 1996 or pay back its $75 million convertible bond, plus a 10 per cent premium.
Rumour is that since it makes no sense going for another listing in Hong Kong, with its price-earnings ratio of three times for construction firms, the company will list the division in Singapore and Malaysia, where construction firms command p-e ratios of about 10 times.
If that occurs, UDL Marine would command $500-600 million, making it worth more than the current value of the entire group (about $485 million), even though it accounts for just half the profits.
Brokerage DBS Securities forecasts the firm's non-marine operations will generate about $70 million per year, so even if the entire marine division is sold, the company still will generate plenty of cash.
The company's recent acquisitions of steel fabricator Argos and building services installer Kenworth look to be solid but unspectacular.
These two areas will beef up UDL's earnings in 1995 and 1996.
At March 31, 1995 Argos had contracts on hand valued at $1.2 billion, of which $713 million was yet to be finished.