MARKET PULSE: United Envirotech, Tee Int'l (10 Jan 2013)

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.67

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.28

MARKET PULSE: United Envirotech, Tee Int'l

10 Jan 2013

KEY IDEA United Envirotech: Outlook still positive after placement Summary: United Envirotech (UEL) intends to place out 98.5m new shares, or 20.6% of the existing share capital, to KKR China Water Investment Holdings at S$0.50 each for a cash consideration of S$49.3m. UEL intends to use 90% of the net proceeds for the acquisition or construction of water treatment plants and the rest for general working capital. Separately, UEL intends to purchase a 13.2% stake in Memstar Technology Ltd (MTL) for a total consideration of S$35m, via cash offer of S$26m and 18m new UEL shares. The issue of new shares to both KKR and MTL will result in some dilution for existing shareholders, but we believe that the outlook for UEL remains upbeat, as China will continue to focus on environmental issues. Maintain BUY with S$0.67 fair value. (Carey Wong) MORE REPORTS TEE International: Earnings miss on weaker associates Summary: TEE International's 2QFY13 results were below our expectations, with net profit falling 32.9% YoY to S$2.5m (taking 1HFY13 net profit to S$5.3m, just 24% of our full year forecast), due mainly to a sharp drop in associates' contributions and higher tax expenses. We believe that the recent run-up in TEE's share price is related to its plan to spin off its real estate business and the prospect of a special dividend if it succeeds. Given the weak 2QFY13 showing, however, we lower our FY13-14 earnings forecasts and cut our fair value estimate to S$0.28 from S$0.34. We have not factored in any potential gains from the spin-off and we prefer to remain cautious on the stock until its real estate business shows better contributions or the outlook for its engineering segment improves. We maintain our HOLD rating on TEE. (Conrad Tan)

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NEWS HEADLINES - US stocks climbed modestly on Wed after a two-day drop as Alcoa Inc kicked off the quarterly earnings season with better-than-expected sales and an improved outlook of higher demand for aluminum. The Dow rose 0.5% to 13,390.51, the S&P 500 index gained 0.3% to 1,461.02 and the Nasdaq ended 0.5% higher at 3,105.81. - Fabrictech Holdings expects a significant drop in revenue and a loss for 4Q12 due to continuing sluggish demand for high-grade textile products, a shift in production facilities and losses on the disposal of old equipment. - Property developer Hong Fok Corp said it may raise its stake in a company it did not name, after the Singapore Exchange queried trading activity for its shares on Mon. - IEV Holdings expects to receive a cash dividend of about US$0.3m from its associated company, CNG Vietnam Joint Stock Company. - Small and medium-sized enterprises in Singapore have subdued growth expectations for turnover and profit, and fewer expect to increase headcount in 1H13, according to a quarterly survey by the Singapore Business Federation and DP Information Group.