Memstar Tech

Memstar Tech: 2Q13 results were announced, revenues increased by 53% y/y to Rmb66m for the quarter, and 49% y/y for 1H12. Earnings increased by 53% y/y to Rmb25m for the quarter, and 35% for 1H12. The increase was achieved mainly on higher revenue of the Group’s membrane segment. No dividends were declared. Gross profit margin improved to 65.8% for 2Q13 from 62.6% for the corresponding quarter. Higher margins achieved from sales of membrane applications to larger scale projects contribute to the improved margins. Finance cost relating to interest expense on finance lease and loan increased by Rmb3.5m from Rmb0.4m for 2Q12 to Rmb3.9m for 2Q13 due mainly to interests on new bank loans drawdown. With China stepping up its efforts for a cleaner environment, its 12th Five Year Plan has emphasized on the wastewater management and new water facility development, making discharge limits more stringent and setting the target to increase urban sewage treatment rate to at least 90% by 2020. As a high performance polyvinylidene fluoride (PVDF) hollow fibre membrane, membrane products and systems manufacturer and supplier, Memstar stands to benefit from the consequent increase in demand for new water treatment plants, especially from developing municipalities as population grows. The Group has moved to a bigger premises in Bukit Batok, Singapore to accommodate its expanded production facility. The new premises is also the new home for the Group’s headquarters and its R&D department. Group trades at 16.7x P/E, vs peer Hyflux at 19.8x.