Excerpt from analyst's report
Maybank Kim Eng analyst: Wei Bin
Its first block of projects will involve the expansion and upgrading of wastewater treatment plants and recycling of treated wastewater with a combined capacity of 1m tonnes/day.
Valued at more than CNY1.5 billion (SGD 300 million), the jobs will commence immediately and are expected to be completed by end-2015.The JV will provide EPC services using UENV’s membrane technology and products. It will also invest in water-treatment projects in Western China.
Right way to expand, in our view: We believe strategic partnerships with local players are the right way to expand for UENV. Xingrong is one of the largest water companies with a stronghold in Western China. UENV can leverage its local presence to penetrate new markets.
Still, in view of a lack of immediate catalysts, maintain HOLD and SGD1.44 TP, at 27x FY3/15E P/E, 10% discount to peers due to its smaller recurring income base. Valuations are rich at 30.3x FY3/15E P/E. We still prefer HanKore and SIIC in the sector.
Related story: MEMSTAR PTE LTD: What's next post UEL merger?