UE E&C

UE E&C: margin expansion boosts 2Q13 bottom line. Revenue at $105.2m, +12% yoy, mainly due to higher contributions from new and on-going projects, offset by completed projects. Net profit nearly tripled to $19.7m from $6.8m, as gross margins expanded to 25.2% from 16.1%, thanks to cost savings arising from the write back of provisions upon the finalization of accounts on completed projects. Against a backdrop of strong construction demand in 2013 projected by the Building and Construction Authority of Singapore at btwn $26b and $32b, mgt remains optimistic about its construction and engineering business. While the construction industry is experiencing a labor crunch due to more stringent foreign manpower quota and other restrictions, the group has made headway, and will continue to focus on productivity enhancements through continuous manpower training and deployment of technology and machinery. The stock trades at 4.5x annualized 1H13 P/E, 1.05x P/B. Balance sheet is strong, backed by $78m net cash ($0.289 per share), which should underpin the trailing dividend yield of 6.2%.