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UNITED ENVIROTECH: Rising recurring income

Written by Leong Chan Teik

Tuesday, 10 November 2009

Dr Lin Yucheng, CEO & Chairman, United Envirotech. Photo by Sim Kih

UNITED ENVIROTECH is one of the earlier S-chips to list on the Singapore Exchange. It was listed in 2004 and has sailed through the years with its reputation intact while some S-chips ran into corporate governance and accounting issues.

The company isn’t exactly an S-chip. Its founder, CEO and chairman is Dr Lin Yucheng, who has been a Singapore citizen since 1993.

I first met Dr Lin around the time of the company’s IPO.

I learnt then that he grew up in Fujian province, received a Bachelor of Science degree and won a government scholarship to pursue a PhD in the Imperial College of Science and Technology in London.

“I thought I would return to China to be a university professor,” he told me. But one day, he found himself at an interview arranged by Singapore’s Economic Development Board.

And that’s how, in 1990, he ended up in Singapore where, after a couple of years, he set up a joint venture that later metamorphosed into United Envirotech.

The company is a leader in advance membrane technology, especially Membrane Reactor (MBR) technology, in treating wastewater from China’s chemical and petrochemical industries.

(S$’000)	1H10 (Sept-end)	1H09	% change
Revenue	20,134	23,240	-13.7
Net profit	4,210	2,467	70.7
Net margin	20.9%	10.6%	10.3 basis points
Net asset value/share	21.62 cts	20.50 cts	5.5
Dividend	-	-

This type of wastewater is harder to treat than normal wastewater discharged by households.

A key advantage of MBR technology: the treatment plant needs just 20-30% of the spatial needs of a conventional plant.

United Envirotech is a key player in the MBR technology space. It is recognized as one of only 7 international MBR companies in the world, along with big names like GE Water & Process Technologies, and Siemens.

United Envirotech has achieved outstanding projects such as its plant for Sinopec Luoyang, which was completed in 2004, and was the largest industrial wastewater treatment plant using MBR in Asia then.

****

At a briefing last Friday for analysts and fund managers, Dr Lin highlighted a couple of things about United Envirotech currently, including:

* Record order book: It now stands at S$160 m with engineering projects to be completed within 18 months, which is an average of S$53.3 m per half year.

That’s significant when compared with the company’s recent revenue. In FY 09 (ended March), the 12-month revenue was S$42.9 million. The revenue inflow was at about the same pace in 1H FY10 at S$20.1 m.

These revenue figures comprise contributions from both turnkey EPC engineering services and recurring treatment businesses.

Model of Guangzhou plant that will be China's largest MBR project - to be built by United Envirotech.

* China’s largest MBR project (picture above): United Envirotech, which has just announced this project, will build the plant in Guangzhou to treat municipal wastewater.

Highlighting the attractiveness of MBR technology, Dr Lin said the plant would be built on less than 10% of the area occupied by a conventional plant, which translates into lots of land savings for the local government.

The plant will be completed in 8-9 months, instead of the normal 18 months, as United Envirotech has committed to complete it before the start of the Asian Games in Guangzhou next November.

Type	Project	% held by UEL	Design capacity (per day)	Current capacity (per day)	Investment value (RMB m)	Concession (years)
TOT	Liaoyang	100	200,000 m³	150,000 m³	180	30
TOT	Xintai	100	30,000 m³	30,000 m³	36	30
TOT	Xintai	100	50,000 m³	40,000 m³	45	30
BOO	Nansha	40	10,000 m³	3,000 m³	85	BOO
TOT	Dafeng	50	15,000 m³	7,500 m³	72	30

* The total current capacity is 230,500 cubic metre, or 75.6% of the 305,000 cubic metre design capacity. There is thus significant upside when the current treatment capacity is expanded.

* The Nansha and Dafeng plants treat industrial water. They incur relatively high investment costs but United Envirotech charges higher rates for industrial water than for treating municipal water (in Liaoyang and Xintai).

* Rising recurring income: United Envirotech has 5 wastewater projects (above) which provide recurring income.

Another 2 projects in Heilongjiang and Liaoyang which were secured in Sept and October will start contributing recurring income when completed in 2010 and 2011, respectively.

For an idea of the size of the recurring revenue, consider that in Q2 (ended Sept 09), it amounted to S$3.2 million (while engineering contributed S$8.1 million). If annualized, the recurring revenue comes up to S$12.8 m.

This figure will increase over time when:

a) the capacity of the treated wastewater rises;
b) United Envirotech increases its charges according to a formula agreed to with its clients, and completes the upgrading of plants.
c) United Envirotech secures or completes the construction of more projects, and operates the plants.

Glossary:

* TOT is Transfer-Operate-Transfer: Company buys the property and operational rights of a facility, and receives his returns through normal business operations within a concession period. At the end of such period, the company transfers the facility to its original owner for no cost.

* BOT is Build-Operate-Transfer: A company finances, designs, constructs, and operates a facility for a specified period of time, after which the ownership is transferred back to the owner. During the operating time, the company charges facility users fees.

MEGA oversold counter..

time for a good showing..

buy on pullback..don't chase..

okie tks.. let watch for that point

Bintang ( Date: 10-Nov-2009 10:49) Posted:

26.5 cents must be the reasonable entry point .

freeme ( Date: 10-Nov-2009 10:47) Posted:

bro i understand that.. so ur view is nw still not a right time to go in right? Any recommended point to take note?

ahh:) i think so too.

Bintang ( Date: 10-Nov-2009 10:49) Posted:

26.5 cents must be the reasonable entry point .

freeme ( Date: 10-Nov-2009 10:47) Posted:

bro i understand that.. so ur view is nw still not a right time to go in right? Any recommended point to take note?

26.5 cents must be the reasonable entry point .

freeme ( Date: 10-Nov-2009 10:47) Posted:

bro i understand that.. so ur view is nw still not a right time to go in right? Any recommended point to take note?

Bintang ( Date: 10-Nov-2009 10:45) Posted:

As a good FA counter , we must also go in at the right timing in order to make greatest profit . If u bought DBS at $25 in last bull run , until now u are still losing money .For UniEnvtech , it is coming down with making of lower highs n lower lows ,that means downtrend movements . To enter , we must wait for it to be stabilized n moving sideway , n when it would change trend or making a reversal . To spot for the rock bottom is really impossible

bro i understand that.. so ur view is nw still not a right time to go in right? Any recommended point to take note?

Bintang ( Date: 10-Nov-2009 10:45) Posted:

As a good FA counter , we must also go in at the right timing in order to make greatest profit . If u bought DBS at $25 in last bull run , until now u are still losing money .For UniEnvtech , it is coming down with making of lower highs n lower lows ,that means downtrend movements . To enter , we must wait for it to be stabilized n moving sideway , n when it would change trend or making a reversal . To spot for the rock bottom is really impossible .

freeme ( Date: 10-Nov-2009 10:28) Posted:

hi bintang,

this counter future looks bright.. based on ur experience.. whats the best px to enter currently? I didnt track this counter too much..

tks

As a good FA counter , we must also go in at the right timing in order to make greatest profit . If u bought DBS at $25 in last bull run , until now u are still losing money .For UniEnvtech , it is coming down with making of lower highs n lower lows ,that means downtrend movements . To enter , we must wait for it to be stabilized n moving sideway , n when it would change trend or making a reversal . To spot for the rock bottom is really impossible .

freeme ( Date: 10-Nov-2009 10:28) Posted:

hi bintang,

this counter future looks bright.. based on ur experience.. whats the best px to enter currently? I didnt track this counter too much..

tks

Bintang ( Date: 10-Nov-2009 10:20) Posted:

10MA is cutting down 55MA n heading down at 34 cents . Therefore 34 cents is now a strong resistance

hi bintang,

this counter future looks bright.. based on ur experience.. whats the best px to enter currently? I didnt track this counter too much..

tks

Bintang ( Date: 10-Nov-2009 10:20) Posted:

10MA is cutting down 55MA n heading down at 34 cents . Therefore 34 cents is now a strong resistance .

ozone2002 ( Date: 09-Nov-2009 16:54) Posted:

32.5! can u smell.......... wat utd is cooking.. :

10MA is cutting down 55MA n heading down at 34 cents . Therefore 34 cents is now a strong resistance .

ozone2002 ( Date: 09-Nov-2009 16:54) Posted:

32.5! can u smell.......... wat utd is cooking.. :)

ozone2002 ( Date: 09-Nov-2009 16:31) Posted:

rise from the dead today? 31.5! good vol..

32.5! can u smell.......... wat utd is cooking.. :)

ozone2002 ( Date: 09-Nov-2009 16:31) Posted:

rise from the dead today? 31.5! good vol..

Agreed. Hehe.

Me still waiting for Binting forecast of possible 0.25 to happen. If happen will buy some more. Anyway at this price already very attractive n can add on. To ne frank, this one worth alot more.

Cheers.

ozone2002 ( Date: 08-Nov-2009 12:33) Posted:

if this baby drops any further, i'll buy every cent it drops..

no reason for it to keep falling, gettin huge projects, revenue up, profit up..

this company is still profitable thru its recurring incomes

Since the market sentiment is still weak , UniEnvtech can only go up to 32 cents n turns down immediately .

Bintang ( Date: 06-Nov-2009 07:53) Posted:

If there would be a stronger rebound , it may fill the gap at 33.5 cents which was created yesterday .

Bintang ( Date: 05-Nov-2009 19:59) Posted:

With this result , if it is to rebound , the most it would go to 31.5 cents

If there would be a stronger rebound , it may fill the gap at 33.5 cents which was created yesterday .

Bintang ( Date: 05-Nov-2009 19:59) Posted:

With this result , if it is to rebound , the most it would go to 31.5 cents .

lawcheemeng ( Date: 05-Nov-2009 18:56) Posted:

quite a good set of result this qtr.......click to read..............see how market react tommorow loh...

With this result , if it is to rebound , the most it would go to 31.5 cents .

lawcheemeng ( Date: 05-Nov-2009 18:56) Posted:

quite a good set of result this qtr.......click to read..............see how market react tommorow loh...

United Envirotech posts 182.4% rise in net to $3.1 million in 2Q

Tags: United Envirotech

Written by The Edge

Thursday, 05 November 2009 18:57

quite a good set of result this qtr.......click to read..............see how market react tommorow loh...

Results just announced :

United Envirotech’s net profit increases 182.4% to S$3.1 million in 2QFY2010

Revenue increased 25.2% to S$11.3 million in 2QFY2010 on higher engineering and recurring income

Order-book stood at S$160.0 million as at 5 November 2009 to be delivered within 18 months

just got vested in united at 30 cents. support at 30 cents seem strong. counter is oversold. for contra only cut loss at 28 cents.

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United Envirotech

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TOT