United envirotech

United envirotech: DBSV upgrades to Buy and lifting its TP to $1.18, noting that FY15 is shaping up to be a banner year for EPC. Recall UENV has won a series of contracts last week, and the house tips that another EPC contract worth RMB250m after securing a RMB160m BOT agreement two days ago. UENV has clinched RMB877m of EPC contracts so far in FY14. More order wins are possible as RMB500-600m of contracts are in advanced bidding stages. Based on new win assumption of RMB800m (from RMB400m previously) in FY15 and 12-18 months completion timeline, estimate that EPC’s revenue could almost double to a record high of $199m in FY15. Assuming 20% growth on Memstar’s annualised FY14 June YE net profit, underpinned by a potential increase in orders from a major customer, estimate that Memstar could generate S$16m net profits in FY15. Based on 20x PE, this would add $0.28 to UENV’s SOTP valuation. With the strong rally in share price recently, UENV may see near-term profit-taking, but any drop in share price presents a good chance to accumulate.