United Envirotech's net profit slipped 1% to $8.4m

Here's what to blame.

According to OCBC Investment Research, United Envirotech Ltd (UEL) posted 3QFY14 revenue of S$64.3m, up 23% YoY and 24% QoQ, driven mainly by the increase in water treatment revenue of S$10.9m (+117% YoY, +30% QoQ); this also led to an income of gross margin to 47.0% versus 46.2% in 2QFY14 and 42.4% in 3QFY12.

However, due to higher depreciation and interest charges, net profit eased 1% YoY (+17.8% QoQ) to S$8.4m. 9MFY14 revenue grew 16% to S$160.3m, meeting 82% of our full-year forecast, while net profit slipped 5.3% to S$21.3m, or just 62% of our FY14 estimate.

Here's more:

Memstar acquisition is “Go”

Separately, the acquisition of Memstar Technology’s (unrated) membrane operations has gotten the nod from both companies’ shareholders. While UEL could start consolidating the purchase from as early as 4QFY14, any meaningful impact is likely to be felt from 1QFY15.

We understand that UEL is already looking to go into third party membrane sales (currently Memstar only uses ~50% of its total capacity, mainly for UEL’s use), and it believes it can achieve up to S$40m worth of these sales in FY15.