- 2QFY3/15 core beat expectations on higher engineering revenue. Raise core EPS by 2-4%.
- Partnership with Chinese SOE and potential new investor could bring UENV to next level, providing catalysts.
- Upgrade to BUY from HOLD. TP raised to SGD1.93 from SGD1.44 after EPS increases and rollover, still at 27x EPS.
2QFY3/15 results beat market and our expectations on higher engineering revenue. Core net profit grew 145% YoY and 111% QoQ. 1HFY3/15 EPS forms 55% of our FY15E forecast. Growth was broad-based. Engineering revenue leapt 104% YoY, thanks to rich contract wins last year. Water-treatment revenue grew 63% YoY from newly-acquired concessions.
Potential new growth model
We are now more positive. We were previously cautious about its order-win momentum, given that it relies heavily on third-party contracts. However, its partnership with Chengdu Xingrong announced a month ago could potentially pave the way for a new growth model. By leveraging Chinese SOE partners’ strong local presence, UENV can gain exposure to much bigger markets as well as focus more on its expertise in membrane and engineering solutions. More importantly, we believe this business is replicable. Discussions with a potential buyer could also usher in a powerful strategic
investor, helping UENV source projects.
We raise core EPS for the next three years by 2-4%. Upgrade to BUY. TP also raised from SGD1.44 to SGD1.93 after our earnings increase and rollover to FY3/16E. This is still pegged at 27x EPS, a 10% discount to peers, for its relatively smaller recurring income base
No comments:
Post a Comment