SG: MARKET PULSE: Tat Hong, United Envirotech (29 May 2013)

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.90

MARKET PULSE: Tat Hong, United Envirotech

29 May 2013

KEY IDEA Tat Hong Holdings: Taking a healthy pause Tat Hong reported revenue and net profit to shareholders of S$837m (+16%) and S$70m (+67%) respectively for FY13. The results were in line with ours and the street's estimates. Gross profit margin improved to 37.6% for FY13 (FY12: 36.5%) due to greater contribution from the higher-margin Crane Rental and Tower Crane businesses. Although the outlook for its key markets remains positive, management believes it is time to slow down its fleet expansion, after a 79% surge in fleet tonnage in the past 5 years. It will now focus on raising its crane productivity, and reducing operating costs through the use of its new yard in Iskandar. Although this may mean more a modest PATMI growth rate of about 10%, the improving cashflow would also bring its gearing level to a more sustainable level. Maintain BUY with unchanged S$1.75 fair value estimate. (Chia Jiunyang) MORE REPORTS United Envirotech: FY13 results almost spot-on United Envirotech Ltd (UEL) reported its FY13 results last night, with revenue jumping 117% to S$185.0m, or just 2% above our forecast, aided by higher engineering business (+132%) and also the 77% jump in water treatment business. Net profit surged 182% to S$29.5m, and was about 1.6% ahead of our estimate. UEL also declared a final dividend of S$0.005/share. Going forward, management continues to see growing demand for membrane-based eater and waste-water treatment services, especially in China; this mainly driven by stricter discharge limits imposed by the Chinese government and the shortage of water supply in various parts of the mainland. We will be speaking to management shortly to get greater clarity on its plans. Meanwhile, we are placing our Buy rating and S$0.90 fair value under review. (Carey Wong)

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