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 increase 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. We will be speaking to management shortly to get more colour on its order book as well as the integration of the recently-acquired membrane business from Memstar. In the meantime, we are putting our Hold rating and S$1.00 fair value (based on 15x FY15F EPS) under review.

Source: OCBC Research - 14 Feb 2014