United Envirotech

United Envirotech: Credit Suisse has an unrated note following UENV’s 3QFY14 results briefing yday. UENV is a membrane based water and wastewater treatment and reculcing solutions provider, servicing China’s chemical, petrochemical, industrial and municipal sectors. The group’s 3QFY14 results were broadly in line with earlier guidance. Net profit was down 1% y/y to $8.4m, dragged by higher depreciation and financing costs. Nevertheless 9M13 operating cash flow (before working capital changes) surged 86% y/y to $58.7m, driven by a doubling of recurring water treatment contribution. Going forward, mgt highlights the following growth catalysts: - For municipal projects, UENV has 695k tpd of capacity in operation and another 235k tpd under construction / in transition, which UENV expects to come on stream within the next two quarters. - Nevertheless, mgt intends to focus on the higher margin industrial water treatment projects, as increasing regulatory pressure is forcing establish industrial parks to upgrade/ increase water treatment facilities. UENV is confident their membrane technology can help them secure projects and higher margins. - UENV has secured two EPC projects and four investment projects in FY14 to date. Mgt expects to see more EPC projects being put up for bid in China. - The acquisition of Memstar should be completed by 2QCY14, with financial consolidation expected to kick in from May.