OCBC Report 4 Jun 14

MARKET PULSE: United Envirotech

4 Jun 2014

KEY IDEA United Envirotech: Downgrade to HOLD United Envirotech Ltd (UEL) posted a disappointing end to FY14, with net profit falling 31.9% to S$20.1m, and only met 58.2% of our FY14 estimate. Going forward, management continues to maintain a pretty positive outlook for the water industry in China. UEL’s EPC order book of S$230m will also be largely completed in FY15; it is still on the lookout for more waste water treatment plants to add to its portfolio. As we believe that things will improve in FY15 – we bump up our revenue forecast by 7.5%; while we expect core earnings to double to S$41.9m, it is still 13% lower than our previous estimate. However, the recent interest in water treatment plays warrants a higher 28x peg (versus 20x before), and our fair value only eases to S$1.30 (from S$1.36). As the stock looks fairly priced, we downgrade our call to HOLD. (Carey Wong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - The S&P 500 Index declined by 0.04% to close at 1,924.24 on Tue, 3 Jun 2014. - Euro-area inflation decreased from 0.7% in Apr to 0.5% in May, lower than the economists’ forecast of a decline to 0.6%. - Frasers Centrepoint Limited announced that it has submitted a non-binding all-cash conditional offer of A$4.48 per stapled security for 100% of the issued stapled securities of Australand. - Sembcorp Industries has been awarded by Project Finance International as Asia’s leading private sector developer under the PFI Asia Best Practice 2014 citations. - Global Yellow Pages’ shareholders have approved the proposed acquisition of Gloria Jean’s Coffees and It’s A Grind for a consideration of A$35.6m. - Ley Choon Group has clinched a S$38.2m deal from the Ministry of Local Government and Provincial Councils Sri Lanka for the rehabilitation and assessment of sewer lines.