United Envirotech Limited (UEL) has formed a 49%/51%-JV with Chengdu Xingrong Investment Co (XRTZ) with a paid-up capital of RMB50m (S$10m) in Sichuan, China. XRTZ is a state-owned enterprise listed in the A-share of the Shenzhen Stock Exchange (RMB17.7b market cap); also owns around 5m m3/day of water treatment concessions. The new JV will provide EPC services using UEL’s membrane technologies and membrane products; will also undertake investments in water treatment projects in western China.

The first block of projects the JV will undertake is the expansion and upgrading of wastewater treatment plants and recycling of treated wastewater with a combined capacity of 1m m3/day – this estimated to exceed RMB1.5b (S$300m). These projects will start immediately and be completed by end 2015; but UEL does not expect them to have any material impact on its NTA or EPS for FY15. We will be speaking with management later to get more colour on the JV. For now, we place our Hold rating and S$1.43 fair value under review.

Source: OCBC Research - 13 Oct 2014