OCBC Report 25 Jun 14

KEY IDEA United Envirotech: Secures Johor EPC contract United Envirotech Ltd (UEL) has just been awarded a MYR45m (~S$17.5m) EPC contract in Johor Bahru, Johor, Malaysia to construct a sewer pipeline and a sewage treatment plant by end 2015. While the award of this sizable contract is noteworthy, we believe that the market is probably keener on UEL’s prospects in China’s WWT (waste-water treatment) industry. The Chinese government is expected to pass a CNY2t (US$320b) water pollution action plan into legalization soon. We expect the move to benefit players with established track record like UEL. In view of the positive development, we bump up our FY15 and FY16 earnings forecasts by 1.5-2.8%. We are also rolling forward our 28x peg to blended FY15/FY16F EPS, thus raising our fair value to S$1.50 from S$1.30. But the recent run-up may have captured most of the good news in its share price, hence we maintain our HOLD rating. (Carey Wong)

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NEWS HEADLINES - A late afternoon selloff on Wall Street sent US stocks lower on Tue, with the Dow Jones Industrial Average falling by the most points in more than a month. - Longcheer Holdings is selling its wholly-owned subsidiary Mobell Technology for 240m yuan (~S$48m) to a company owned by Longcheer's executive directors. - Oxley Holdings' tie-up with Sepang Goldcoast and Sepang Bay to develop two parcels of land in Selangor, Malaysia has fallen through. - LionGold Corp's bid to raise S$5m from a proposed share subscription evaporated yesterday as the remaining four would-be subscribers backed out of the deal. - ICP's subsidiary has entered into an agreement with budget hotel group Travelodge to acquire the registered trade mark rights to the brand name Travelodge in Asia for A$3m (S$3.51m). - Armarda Group's independent auditor has flagged the group's larger net loss of S$88.25m and negative operating cash flows of S$70.04m for FY14, in an emphasis of matter. - Polaris, a mobile phone and consumer electronics distributor and retailer, is in talks to acquire shares in a South-east Asian company with a similar business model. - Yanlord Land Group has secured a three-year US$385m syndication loan from Hang Seng Bank, HSBC, Standard Chartered Bank (Hong Kong) and DBS Bank.