MARKET PULSE: Goodpack, United Envirotech (31 May 2012)

Stock Name: Goodpack
Company Name: GOODPACK LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.70

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.40

MARKET PULSE: Goodpack, United Envirotech

31 May 2012

KEY IDEA United Envirotech: BUY with S$0.40 FV United Envirotech Limited (UEL) reported FY12 revenue rose 9.4% to S$85.3m, or 4.1% below our forecast, while net profit slipped 34.6% to S$10.5m; but stripping off exceptional items, core net profit would have fallen 15.0% to S$12.5m, or just 1.6% shy of our forecast. UEL also declared a final dividend of 0.3 S cents per share, unchanged from last year. Going forward, management continues to remain upbeat about its prospects in the waste-water treatment industry in China, driven by the stricter discharge limit imposed by the Chinese government and the shortage of water supply in various parts of the country. And in view of the growing contribution from its Treatment business, we are bumping up our FY13F earnings estimate by 5.4%; we are also looking for a potential growth of 12.5% top-line and 12.9% bottom-line in FY14. Meanwhile, we are switching from a DCF-based valuation to the PER one. Ascribing a market-neutral PE of 12.8x to FY13F EPS, we derive a new fair value of S$0.40. Maintain BUY. (Carey Wong) MORE REPORTS Goodpack Limited: Slowly inching higher Since our last report on 14 May, Goodpack has edged higher by 0.9% as compared to a decline of 3.5% for the FTSE STI Index. Given Goodpack's decent set of 3Q12 results and its reliance on the automotive industry, we are not surprised by this outperformance. Automotive sales - including tyre manufacturers like Goodyear - have reported encouraging results for the first quarter of the year, and automotive sales in Asia for April saw YoY increases in the large markets of China, Korea, India, Taiwan and Indonesia. We reiterate our expectations for Goodpack to close out FY12 well given the revenue support from the automotive industry, and improving operating margins from management's effective cost control initiatives. Leaving our projections and corresponding fair value estimate of S$1.70 unchanged, we maintain our HOLD rating. (Lim Siyi)

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NEWS HEADLINES - US stocks retreated as bond yields in Italy and Spain surged; and Greek polls added to uncertainty about whether it would remain in the euro-zone. The S&P 500 Index and the DJIA fell 1.4% and 1.3% respectively. - Crude oil futures closed below US$88 for the first time since Oct on the back of concerns over Spain and the scaled-back expectations for a stimulus plan for China. - Yeo Hiap Seng plans to take its Bursa-listed subsidiary, Yeo Hiap Seng (Malaysia) Bhd private. Entitled YHS (Malaysia) shareholders will receive a total capital repayment of MYR3.60 per share, a premium of 14% over the close on May 28. - Cache Logistics Trust is seeking to redeem S$35m 3.50% fixed rate notes due 2016, which were issued under its S$500m multicurrency medium term note programme. - Old Chang Kee posted a net profit of S$4.5m for the 15 months ended in Mar. Revenue was S$76.5m. - Engineering management service provider Asiatic Group registered a FY12 net loss of S$73k, better than the S$558k loss a year ago. Revenue had climbed 5% to S$51m.