United Envirotech Ltd (UEL) made a decent start to FY15, with 1Q revenue jumping 51% YoY to S$66.3m, boosted by a 59% surge in its treatment business to S$20.5m, a 23% jump in its EPC business to S$38.4m, as well as the maiden contribution of S$7.4m from external membrane sale. Recall that UEL recently acquired the membrane manufacturing business of Memstar. Net profit nearly tripled to S$22.5m, in part aided by an exceptional gain of S$14.2m arising from the disposal of Available-for-sale investment (likely Memstar shares).

Excluding the one-off gain, we estimate the core earnings would have come in around S$8.3m, still up around 45% YoY, meeting 20% of our full-year forecast; revenue met around 24%. We will be speaking more with management in due course. For now, we maintain our HOLD rating and S$1.50 fair value (based on 28x blended FY15/FY16F EPS).

Source: OCBC Research - 14 Aug 2014