Stable flow of recurring income

•

diluted TP of S$0.69Initiate coverage with BUY, +41% to fully

•

income streams gather momentumExpect earnings breakthrough as recurring

•

growth in FY14F/15F, industry averages 13xAttractive at 8x/7xPE for 75%/21% PATMI

•

CB dilution can be potential overhangPotential upside from acquisitions & expansion

> 60% of profits coming from long-term recurring

treatment income.

membrane-based wastewater treatment company, has

been shifting to a stable, recurring and more profitable

earnings profile with the acquisition of operating water

plants in China. By FY14Mar, UENV would have a total

processing capacity of 1.18b m3/day to generate S$25m

or 60% of group PATMI. This treatment income is

recurring for the life of the water concessions (30 yrs).United Envirotech (UENV), a

Key beneficiary of China’s rapid growth in

environmental protection.

UENV should continue to win engineering and

construction (EPC) contracts given the growing demand

for membrane-based water treatment plants in China to

meet stricter discharge limits, which old plants are not

equipped to process. We believe UENV can maintain

~Rmb400m of new EPC orders over the next two years.Besides treatment services,

Earnings CAGR of 46% from FY13F-FY15F.

potential upside from higher utilisation rates. Besides,

we have not incorporated the Phase 2 expansion or

acquisitions.UENV has

BUY, TP S$0.69.

PE for EPC and DCF valuation (8.6% WACC) for

treatment. We have also assumed full dilution of the

S$136.2m convertible bond to Kholberg Kravis Roberts

& Co (KKR).

At A Glance

Issued Capital / Fully Diluted (m shrs) 479 / 793.1

Mkt. Cap (S$m/US$m) 239 / 196

Major Shareholders

Yu Cheng Lin (%) 18.1

Ching Wah Goh (%) 17.8

Oei Hong Leong Peter (%) 17.6

Free Float (%) 46.5

Avg. Daily Vol.(‘000) 1,637Our sum-of-parts TP is based on 10x