United Envirotech clinches Johor sewer treatment plant deal

Bright Chinese prospects also await.

United Envirotech Ltd (UEL) has clinced a $17.5m (MYR45m) EPC contract in Johor Bahru, Johor, Malaysia to construct a sewer pipeline and a sewage treatment plant by the end 2015.

According to OCBC, the award is noteworthy but the company’s Chinese prospects remain more attractive over the Malaysian win.

“The Chinese government is expected to pass a CNY2t (US$320b) water pollution action plan into legalization soon. We expect the move to benefit players with established track record like UEL. In view of the positive development, we bump up our FY15 and FY16 earnings forecasts by 1.5-2.8%,” stated OCBC.

Here’s more from OCBC:
We believe that someone with UEL’s expertise and track record in running WWT plants could be a direct beneficiary. Management continues to be on the lookout for good WWT projects to add to its portfolio.

The TOT model works best for UEL because it provides the company with an existing plant that it can not only provide immediate cashflow but also offers the opportunity for expansion/upgrades, raising both treatment capacity and tariffs.

We are also rolling forward our 28x peg to blended FY15/FY16F EPS, thus raising our fair value to S$1.50 from S$1.30.