Revenue from engineering (“EPC”) segment posted S$6.5 million while water treatment segment continued to deliver stable income of S$2.6 million. The decrease in EPC sales was mainly due to delay in awarding of projects and also slowdown in industrial activities.

Finance costs decreased by 35.4% yoy to S$0.3 million, which was consistent with the decrease in the borrowing rate for the bank loans of Liaoyang and Xintai companies.

Increase of S$7.6 million in the investment in associates to S$9.6 million was driven by the investment of S$7.7 million in Dafeng city to undertake a MBR wastewater treatment plant for the industrial park.

Increase in financial receivables from S$48.3 million to S$53.1 million was mainly due to the higher value on the asset resulted from strengthening of RMB to SGD and also upgrading of one of the existing plant of S$2.6 million to meet a higher discharge limits.

Remain profitable for longer term: Despite the downgrade in earnings estimates, we are of the view that United Envirotech Ltd (“UEL”) is one of the few companies that can remain profitable amid the global economic crisis we are facing now. The EPC segment is not expected to have fast recovery as the decline in industrial activities has not bottomed out yet. Nevertheless, we heave a sign of relief as water treatment segment provides sustainable cash flow, which is most needed by many firms to weather through the current crisis.

Investment in associate: It is encouraging to see UEL expanding its water treatment segment by continually looking for investment opportunities.Probably this is the best time to grow business inorganically as things are sold at deep discount now. Nonetheless, as of now, we are unable to give a constructive view on the investment as the detailed assessment is limited by lack of information being disclosed.

Valuation: We continue to adopt conservative NTA multiples to evaluate the counter. Applying 0.7x FY10 NTA per share, we derive a target price of S$0.15, representing 25% upside potential. Maintain BUY.