Summary: United Envirotech Ltd (UEL) posted a disappointing end to FY14. Revenue of S$202.3m, up 9.3%, was about 3.8% above our forecast; the boost came mainly from the increase in treatment business from S$40.6m to S$62.6m. However, net profit fell 31.9% to S$20.1m, and only met 58.2% of our FY14 estimate. According to management, the main drag came from higher finance costs from the MTN bond of S$100m and additional bank borrowings; the weaker RMB against the USD also resulted in a forex loss of S$1.4m versus a gain of S$2.1m in FY13.

UEL declared a final dividend of 0.3 S cent versus 0.5 S cent a year ago. While management has maintained a pretty positive outlook for FY15, we place our Buy rating and S$1.36 fair value under review, pending further discussion with management.

Source: OCBC Research - 2 Jun 2014