SGD NEW ISSUE REVIEW : United Envirotech 3Y 5%


– New UEL 3yr SGD announced on the back of strong IOIs following 2 days of investor meetings
– Initial Price Guidance: 5% area
– Issue Size: TBD
– Timing: As early as today

– Comps:
HYFLUX 4 ¼ 09/07/18 Corp 100.65/3.96%
HYFLUX 4.2 08/29/19  Corp 99.50/4.33%
HYFLUX 4.6 09/23/19  Corp 101.00/4.35%


* Listed on the SGX since 2004, United Envirotech Ltd (UEL) has more than 10 years of proven track record in providing membrane bioreactor wastewater treatment solutions in Asia, and owns 39 water plants across 10 provinces in China
*  With its technological advantage in the industrial water and wastewater sector, UEL is well positioned to benefit from the increasingly stringent water discharge standards in China
* Growing installed base of water treatment plants which produce a predictable, recurring revenue stream under long-term concession agreements
* Strong sponsorship and shareholders, with CITIC and KKR being the two largest shareholders with effective ownership of 55.0% and 23.8%, respectively
* Strong financial performance with 9M FY2015 net profit growing c.135% y-o-y to S$53.6 million and conservative financial gearing and leverage

Same covenants and terms apparently as the old deal – for details :

The old United Envirotech 7.25% 09/2016 is not trading these days and we are not seeing profit takers even at its cash price of 103 (4.91%).

I would not compare UEV (United Envirotech market cap SGD 1.75 bio Fin Lev 2.4 times) to Hyflux as much as I would compare them to the former Hankore which is now known as China Everbright Water Ltd (CEWL, market cap SGD 2.82 bio Fin Lev 2 times), given their geography and parentage – both operate in China and are linked to Chinese state-owned-enterprises.

Hyflux does not enjoy the Temasek ownership edge, unlike Olam, which makes their Financial Leverage number of 5.3 times look a bit intimidating when it is actually due to their high risk (for places in Middle East and Africa) sales model of build to give away and collect later way of doing business.

Parentage is very important for these environment engineering companies if we consider what happened to Sound Global (967 HK and not government linked) which is currently suspended, downgraded to Caa2/B- and have their bonds going at about 82 cts to the dollar.

United Envirotech is majority owned by  CITIC whose 5 year USD bonds are going at low 3%.

SINGAPORE & HONG KONG–(BUSINESS WIRE)– CITIC Limited (“CITIC”) and KKR jointly announce today the formation of a consortium1 through related entities, CITIC Environment Protection Co. Ltd. and KKR China Water Investment Holdings Limited respectively, to make a pre-conditional voluntary offer (“VGO”) for all the shares in United Envirotech Ltd. (“UEL”). UEL is a Singapore-listed leading membrane-based water and waste-water treatment and reclamation solution provider with businesses mainly in China’s chemical, petrochemical and industrial park sectors.

The transaction allows CITIC to become the controlling shareholder of UEL through the holding of a majority interest in the consortium.

5% seems almost like riches just like their previous 7.25% blew the markets away then and caused a repricing of risk back in 2013.

In a year where we are getting miserly 3% for 5 year real estate names that are not even government linked/guaranteed/associated, I say fund managers and retail investors alike would find this bond quite refreshing indeed.