United Envirotech

United Envirotech: Recent surge could be partly spurred by news of a possible delisting from SGX by peer Sound Global. Given the recent market rout, United Envirotech (UNEV) now trades at a mid-range 15x trailing P/E. This is despite the group’s earnings surging nearly three-fold in its recent FYMar13 results to $29.5m, driven by strong improvements in both its engineering and water treatment businesses. Private equity M&A specialist, Kohlberg Kravis Roberts (KKR) currently holds 16.6% of the water treatment company but could raise its stake to 45.2% and trigger a mandatory takeover if it decides to convert its entire US$113.8m convertible bonds into UENV shares. The 2.5% 2016 convertible bonds carry a conversion price of $0.45/share, and are deep in the money. Given KKR’s expertise in leveraged buyouts and restructuring deals, we do not rule out the prospects of the private equity firm making a privatization move on UNEV to extract maximum value from its investment.