United Envirotech Ltd (UEL) reported its FY15 results, which came in mostly within our expectations. Revenue jumped 73% to S$349.0m, which exceeded our forecast by about 22%, mainly due to higher-than-expected EPC revenue. While reported NPAT jumped 195% to S$59.3m, we estimate that core earnings (excluding one-off gains and forex) came in around S$42.1m, or about 5% above our forecast. UEL declared a final dividend of S$0.005/share. Going forward, management remains upbeat about its prospects, where it expects to benefit from the stronger government policy support in the water treatment sector and greater need for membrane-based water treatment solutions for the treatment and recycling of water in China. We have adjusted our FY16 estimates up by an average of 30% and this also bumps up our fair value from S$1.70 to S$1.74, still based on 28x FY16F EPS. Maintain HOLD; key risk would be potential share placements to increase the free float (currently around 12.3%).
FY15 core earnings mostly in line
United Envirotech Ltd (UEL) reported its FY15 results, which came in mostly within our expectations. Revenue jumped 73% to S$349.0m, which exceeded our forecast by about 22%, mainly due to higher-than-expected EPC (+43% at S$199.4m) and new membrane (S$47.3m) revenue; treatment revenue +63% to S$102.2m. While reported NPAT jumped 195% to S$59.3m, we estimate that core earnings (excluding one-off gains and forex) came in around S$42.1m (still +106%), or about 5% above our forecast. UEL declared a final dividend of S$0.005/share, versus S$0.003 the previous year.
Positive on its fully integrated model
Going forward, management says it will continue to harness its strength as a fully-integrated water solutions provider; and it is particularly upbeat about its newly-acquired membrane manufacturing business, Memstar. UEL intends to double its existing membrane capacity from 5mil m2 to 10mil by the end of FY16; this to cater to stronger demand from countries like China and USA. It further believes that the company will benefit from the stronger government policy support in the water treatment sector and greater need for membrane-based water treatment solutions for the treatment and recycling of water in China.
More involvement from CITIC
Meanwhile, the management team from CITIC was also present at the analyst briefing to further elaborate on the group’s strategy for UEL and its intention to grow the environmental business. As articulated in our previous reports, we believe that the SOE status of CITIC should help UEL open more doors and expand its reach into other regions of China; another benefit would be the access to cheaper funding on CITIC’s credit rating in China. Last but not least, UEL could enjoy some very low hanging fruits in the form of ready waste-water treatment projects in related companies under the CITIC umbrella.
HOLD with higher S$1.74 fair value
We have adjusted our FY16 estimates up by an average of 30% and this also bumps up our fair value from S$1.70 to S$1.74, still based on 28x FY16F EPS. Maintain HOLD; key risk would be potential share placements to increase the free float (currently around 12.3%).
United Envirotech Ltd (UEL) reported its FY15 results, which came in mostly within our expectations. Revenue jumped 73% to S$349.0m, which exceeded our forecast by about 22%, mainly due to higher-than-expected EPC (+43% at S$199.4m) and new membrane (S$47.3m) revenue; treatment revenue +63% to S$102.2m. While reported NPAT jumped 195% to S$59.3m, we estimate that core earnings (excluding one-off gains and forex) came in around S$42.1m (still +106%), or about 5% above our forecast. UEL declared a final dividend of S$0.005/share, versus S$0.003 the previous year.
Positive on its fully integrated model
Going forward, management says it will continue to harness its strength as a fully-integrated water solutions provider; and it is particularly upbeat about its newly-acquired membrane manufacturing business, Memstar. UEL intends to double its existing membrane capacity from 5mil m2 to 10mil by the end of FY16; this to cater to stronger demand from countries like China and USA. It further believes that the company will benefit from the stronger government policy support in the water treatment sector and greater need for membrane-based water treatment solutions for the treatment and recycling of water in China.
More involvement from CITIC
Meanwhile, the management team from CITIC was also present at the analyst briefing to further elaborate on the group’s strategy for UEL and its intention to grow the environmental business. As articulated in our previous reports, we believe that the SOE status of CITIC should help UEL open more doors and expand its reach into other regions of China; another benefit would be the access to cheaper funding on CITIC’s credit rating in China. Last but not least, UEL could enjoy some very low hanging fruits in the form of ready waste-water treatment projects in related companies under the CITIC umbrella.
HOLD with higher S$1.74 fair value
We have adjusted our FY16 estimates up by an average of 30% and this also bumps up our fair value from S$1.70 to S$1.74, still based on 28x FY16F EPS. Maintain HOLD; key risk would be potential share placements to increase the free float (currently around 12.3%).
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