United Engineers
Aug 14 close: S$3.46
Phillip Securities Research, Aug 14
1H07 results in line with our estimates: United Engineers (UEL) has reported stable 1H07 financial results, with revenue dropping slightly (-5 per cent year-on-year) to S$268.5 million from S$282.5 million in 1H06. However, gross profit rose 4 per cent to S$49.0 million from S$47.2 million. In retrospect, its gross profit margin rose 1.6 percentage points from 16.7 per cent (1H06) to 18.3 per cent (1H07). According to UEL, the increase was due to stringent job selection in the Engineering & Construction division and also the higher rental rates achieved in the Integrated Facility Management division.
Other income, notably the gain from partial divestment of Yongnam's shares, has contributed significantly to its bottom line. Nevertheless, expenses have also increased substantially, such as the administrative expenses (+37 per cent year-on-year), distribution costs (+47 per cent year-on-year), and interest expense (+16 per cent year-on-year).
The Rochester achieved record prices in District 5. Earlier this month, UEL announced that it has achieved new highs in District 5, with its recently launched condominium development, The Rochester. An average selling price of S$1,300 psf was achieved and almost all the units were fully sold. This is in line with our assumption of S$1,300 psf in our valuation dated July 18, 2007. Its revenue and profit would be recognised in stages as the construction progresses in the next three years.
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