By Carey Wong
Wed, 30 Jun 2010, 08:25:19 SGT

Market Pulse: Ezion Holdings, United Envirotech and Wilmar (30 Jun 2010)

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Ezion Holdings: Upside potential still available

Summary: Ezion Holdings (Ezion) is an offshore marine group with two main business divisions: 1) Chartering and offshore support services and 2) Marine services. It is the owner of a fleet of liftboats which it believes is the largest and most sophisticated class in the world. The group is one of the first to introduce the use of liftboats in Asia and the Middle East, hence it may be able to enjoy first mover advantage should demand for liftboats grow in the region. Ezion has a bareboat charter with Ezra with regards to its first liftboat. The group’s JV company has also secured a A$350m contract with Chevron for Australia’s Gorgon project to provide marine logistics vessels for 3.5 years. This is for the first phase of the development of a gas field, and there may be additional opportunities for the group in subsequent phases of development. We are initiating coverage on Ezion with a BUY rating with fair value estimate of S$0.81 (upside potential about 30%), based on 12x blended core FY10/11F earnings. (Low Pei Han)


United Envirotech: Surfing on China’s Growing Water Needs

Summary: United Envirotech Ltd (UEL) is a comprehensive environmental solutions provider, providing both environmental engineering and environmental consultancy solutions. UEL has an established track record in MBR, especially in the chemical, petrochemical and industrial park sectors. UEL has also ventured into the municipal sector with the building of one of China’s largest MBR plants in Guangzhou City. China currently faces a severe strain on its water resources, depleted by more than a decade of rapid industrial growth. With water pollution fast becoming a concern as well, UEL believes it is well placed to ride on the government’s growing emphasis on environmental responsibility and stricter rules on discharge limits. Buoyed by the optimistic outlook for China’s water and waste-water industry, UEL believes that there are opportunities to secure both new and upgrading projects in the industrial and municipal sectors. Funding is unlikely to be an issue as it had recently secured a RMB3b credit facility. Assuming a long-term growth rate of 2%, a required return on equity of 7.6%, we derive a FCFE fair value of S$0.52 per share. Given the 36.8% upside from the current stock price, we initiate coverage on UEL with a BUY rating. (Carey Wong)


Wilmar Int’l Ltd: Forms biochemical refinery JV

Summary: Wilmar International Limited (WIL) has entered into an agreement to form a joint venture with US-based Elevance Renewable Sciences, Inc. (ERS) to construct a world-scale bio-refinery. According to ERS, the JV will use its proprietary bio-refinery technology to produce high-value performance chemicals, advanced bio-fuels and oleo-chemicals. The manufacturing facility – with a capacity of 180kMT and ability to expand up to 360kMT – will be located within WIL’s new integrated manufacturing complex now under construction in Surabaya, Indonesia. However, the announcement gives no other details such as the ownership of the JV or the investment quantum. Nonetheless, we see the latest development as a positive move for WIL as it will help kick start its bio-refinery efforts and also expand its downstream capabilities. But as the new plant is only likely to come online in 2011, we will hold off making any adjustments to our estimates for now. Maintain BUY with S$7.15 fair value (based on 18x FY10F EPS). (Carey Wong)


For more information on the above, visit www.ocbcresearch.com for the detailed report.


NEWS HEADLINES

- Private equity heavyweight Carlyle Group is making a US$190m investment in China Fishery Group via a private placement of new shares and warrants.

- The BT says if Khazanah’s bid fails, a poison pill embedded in the shareholder agreement with Pantai group could “hurt” Parkway Holdings.

- Taiwan and China signed a historic trade pact yesterday.

- According to NUS, the overall price index for non-landed private homes rose 2.6% MoM in May.

- The Ministry of Trade & Industry is offering 10 industrial plots for sale under the 2H10 land sales program.

- AIMS AMP Capital Industrial REIT has started legal proceedings against a tenant for arrears in rental and repossession of the property.

- Sembcorp Industries is building a stand-alone S$40m wastewater treatment plant at Jurong Island.

- Singapore Airlines is raising S$500m via 10-year fixed rate notes due in 2020.

- Boustead Singapore’s wastewater treatment unit has clinched a S$21m contract in the UAE.