UNITED ENVIROTECH achieved record net profit of $14.9 million for the year ended 31 Mar 2010, a year-on-year increase of 305.4%.
About 82.2% of the revenue (of $69.1 million) came from its engineering services segment, but what Dr Lin Yucheng, its CEO and founder, wanted to highlight to analysts yesterday was the contribution from the water treatment segment.
Here’s why:
* High net profit margin: Though it made up only 17.8% of the revenue contribution, water treatment contributed 51.7% (or $7.7 million) of the net profit.
Water treatment revenue stood at $12.3 million, almost 4X higher than in FY05, reflecting United Envirotech’s drive to increase its recurring income stream to smoothen out any sharp fluctuation from its EPC (engineering, procurement and construction) business segment.
(See chart below)
* Doubling recurring income: Water-treatment revenue recurs from 5 projects, and will rise further with when 2 new Build-Operate-Transfer projects in Heilongjiang and Liaoyang are added to the portfolio.
They will start contributing water-treatment income from October this year and April next year, respectively.
As a result, over the next two years, the total treatment capacity managed by United Envirotech will double from the current 305,000 cubic meters per day to 665,000 cubic metres a day.
Dr Lin said, he expects United Envirotech to surpass other Singapore-listed water companies in revenue and profit from water-treatment this year.
The company is a leader in the use of Membrane Reactor (MBR) technology in treating wastewater from China’s chemical and petrochemical industries.
This type of wastewater is harder to treat than normal wastewater discharged by households, and is treated most cost-effectively using MBR technology, according to Dr Lin.
A key advantage of MBR technology: the treatment plant needs just 20-30% of the spatial needs of a conventional plant.
United Envirotech is recognized as one of only 7 international MBR companies in the world, along with big names like GE Water & Process Technologies, and Siemens.
That's why its customers include prominent names such as Sinopec, CNOOC, CNPC and Sembcorp.
”We are still a small company but we have huge potential with our MBR technology. We have spent almost a decade on developing our MBR technology,” said Dr Lin.
And he revealed that in the first four months of this year alone, United Envirotech has filed 7 patents with the authorities in China.
For all that, he pointed out, United Envirotech remains the most undervalued water company, trading at a PE of about 8.4X (based on earnings per share of 3.56 cents and a recent stock price of 30 cents).
Adding to its attractiveness, after two years of being in a net debt position, it achieved net cash of $16.4 million as of end-FY10.
And it is in the midst of seeking a TDR listing in Taiwan, where it expects a higher valuation for its shares.
Recent story: UNITED ENVIROTECH: Sharp discount to peers
