United Envirotech Ltd (UEL) reported its FY13 results, with revenue jumping 117% to S$185.0m, or just 2% above our forecast, while net profit surged 182% to S$29.5m, and was about 1.6% ahead of our estimate. UEL also declared a final dividend of S$0.005/share. Going forward, management intends to further expand its recurring water treatment revenue by acquiring or investing in more water treatment plants. We believe UEL has the financial means to achieve its goal after its recent fund raising exercises. We are also positive on the company’s long-term prospects. Maintain BUY with a higher S$1.03 fair value (versus S$0.90 previously), still based on 13x FY14F EPS.
FY13 results almost spot-on
United Envirotech Ltd (UEL) reported its FY13 results, with revenue jumping 117% to S$185.0m, or just 2% above our forecast, aided by higher engineering business (+132%) and also a 77% jump in the water treatment business. Net profit surged 182% to S$29.5m, and was about 1.6% ahead of our estimate. UEL also declared a final dividend of S$0.005/share.
Still looking to expand portfolio
Going forward, management continues to see growing demand for membrane-based water and waste-water treatment services, especially in China; this mainly driven by stricter discharge limits imposed by the Chinese government and the shortage of water supply in various parts of the mainland. On its part, it will actively seek out suitable engineering and investment projects. And as a long-term strategy, UEL intends to continue expanding its stable and recurring treatment income.
Financial means to achieve goal
Recognizing that the water treatment business is pretty capital intensive, UEL has already moved to raise funds over the past year or so. From its convertible bond issue and share placement to KKR, the company still has about S$88m of utilized proceeds. Based on its usual 40% equity/60% debt policy, we estimate that UEL can comfortably finance up to S$220m worth of projects. We understand that it is considering issuing bonds as another source of funds.
Upping FV to S$1.03
We raise our FY14 revenue forecast by 4% and core earnings by 20%, as we expect to see more high-margin recurring income flowing through as more upgraded treatment plants start contributing in the coming quarters. This in turn raises our fair value from S$0.90 to S$1.03, still based on a 13x FY14F EPS. Although near-term profit-taking may occur following the stock’s stellar performance prior to the results announcement, we remain upbeat about its long-term prospects. Maintain BUY.
United Envirotech Ltd (UEL) reported its FY13 results, with revenue jumping 117% to S$185.0m, or just 2% above our forecast, aided by higher engineering business (+132%) and also a 77% jump in the water treatment business. Net profit surged 182% to S$29.5m, and was about 1.6% ahead of our estimate. UEL also declared a final dividend of S$0.005/share.
Still looking to expand portfolio
Going forward, management continues to see growing demand for membrane-based water and waste-water treatment services, especially in China; this mainly driven by stricter discharge limits imposed by the Chinese government and the shortage of water supply in various parts of the mainland. On its part, it will actively seek out suitable engineering and investment projects. And as a long-term strategy, UEL intends to continue expanding its stable and recurring treatment income.
Financial means to achieve goal
Recognizing that the water treatment business is pretty capital intensive, UEL has already moved to raise funds over the past year or so. From its convertible bond issue and share placement to KKR, the company still has about S$88m of utilized proceeds. Based on its usual 40% equity/60% debt policy, we estimate that UEL can comfortably finance up to S$220m worth of projects. We understand that it is considering issuing bonds as another source of funds.
Upping FV to S$1.03
We raise our FY14 revenue forecast by 4% and core earnings by 20%, as we expect to see more high-margin recurring income flowing through as more upgraded treatment plants start contributing in the coming quarters. This in turn raises our fair value from S$0.90 to S$1.03, still based on a 13x FY14F EPS. Although near-term profit-taking may occur following the stock’s stellar performance prior to the results announcement, we remain upbeat about its long-term prospects. Maintain BUY.
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