United Envirotech

United Envirotech: following UE’s previous failed attempts to acquire the entire equity interest in Tongji Environment, Tongji has:
i) granted UE a call option over 50% equity interest in Tongji, and
ii) agreed to convert the RMB 30m refundable earnest money (previously advanced by UE) to a loan. The loan will be secured by a charge over the entire equity interest in Tongji…

The agreement gives UE more time to access whether to proceed with the invmt in Tongji, while being compensated via the 3% pa interest payments on the loan (not great in our view). Barring credit risk, we think impact on UE is likely limited, but would prefer if the company had used the cash instead for projects with more certainty in delivering higher returns. Still stock not expensive at 9x PE. DMG, OCBC have recent Buy calls with $0.52/0.53 targets.