Get a glimpse of United Envirotech's cash cow in China

It's where 60% of PATMI will be juiced.

According to DBS, 60% of profits coming from long-term recurring treatment income. United Envirotech (UENV), a membrane-based wastewater treatment company, has been shifting to a stable, recurring and more profitable earnings profile with the acquisition of operating water plants in China.

Here's more from DBS:

By FY14Mar, UENV would have a total processing capacity of 1.18m m3/day to generate S$25m or 60% of group PATMI. This treatment income is recurring for the life of the water concessions (30 yrs).

Key beneficiary of China’s rapid growth in environmental protection. Besides treatment services, UENV should continue to win engineering and construction (EPC) contracts given the growing demand for membrane-based water treatment plants in China to meet stricter discharge limits, which old plants are not equipped to process.

We believe UENV can maintain ~Rmb400m of new EPC orders over the next two years.

Earnings CAGR of 46% from FY13F-FY15F. UENV has potential upside from higher utilisation rates. Besides, we have not incorporated the Phase 2 expansion or acquisitions.