Jeremy Peh contributed this article to NextInsight
United Global (UG) has delivered a superb set of results for 1H 2017 as shown in the table:
|
|
1H2016 |
1H2017 |
Change |
|
Revenue |
42,307,000 |
45,815,000 |
8.3% |
|
Gross Profit |
6,149,000 |
7,867,000 |
27.9% |
|
NPAT |
2,722,000 |
3,639,000 |
33.7% |
|
Gross Profit Margin |
14.5% |
17.2% |
2.7 ppt |
|
Net Profit Margin |
6.4% |
7.9% |
1.5 ppt |
The management team led by Jacky Tan has done tremendous work since it went IPO in Jul 2016:
1. Completed the PLI acquisition in Jul 2017 and tripled its blending capacity.
2. Established JV/Collaboration/MOU in Taiwan, Myanmar and Japan.
3. Added 4 countries (East Timor, Iraq, Kazakhstan an Mauritius) to the distribution network.
|
Stock price |
34 c |
|
52-week range |
28 – 35 c |
|
PE (ttm) |
11.4 |
|
Market cap |
S$108 m |
|
Shares outstanding |
316 million |
|
Dividend |
2.94% |
|
Year-to-date return |
19% |
|
Source: Bloomberg |
|
We are likely to see strong growth momentum from UG’s existing lube oil business:
1. PLI started to contribute earnings from 1 Jul 2017, which should lead to a substantial jump in UG earnings growth in the second half.
Potential upside may also come from synergies once PLI is fully integrated into the UG group.
With PLI’s blending capacity of 80,000MT (against UG’s 44,000 MT) plus storage tanks of 17,000 MT, we can expect to see strong earnings growth over the next few years when the UG management team takes over the operation management of PLI.
2. UG has been aggressively expanding its sales territories over the last one year to about 37 countries. Such a strong global network not only presents various business opportunities to the company but also enhances its earning resilience.
Of particular interest is the strategic collaboration with CNOOC (China) that jointly owns the “Hydropure” brand, the joint venture with a Taiwan distributor and also the joint operation with Lighthouse Enterprise in Myanmar. A recent MOU in Japan may also open a new revenue stream in mid-term.
Jacky Tan, CEO of United Global, at its manufacturing facility in Tuas. NextInsight file photo.
3. Post PLI acquisition, UG may likely set up more production plants in strategic countries via JVs or M&A.
Besides the lube oil business, management is exploring new businesses as growth pillars. It recently announced an MOU to establish a JV with a Japanese company to manufacture and distribute nano fibre material as oil absorbent.
The market size for such materials seem to be huge as oil absorbent materials are in high demand to remove waste oil in factories, restaurants and shops before they are discharged according to environmental regulations. If the JV is successful, we are likely to see a new revenue stream from as early as 2H 2018.
|
Period |
Dividend Per Share |
Payout Ratio |
|
FY2016 |
1.0c |
36.4% |
|
1H2017 |
0.5c |
31.4% |
Overall, the management team led by CEO Jacky Tan has shown strong business development and leadership capabilities over the last one year since listing in Jul 2016. UG has also been generous in issuing dividends (see table).
If UG can show strong earnings growth, the market is unlikely to ignore this undiscovered gem for long.
