United Global Ltd – Lubricated engines August 12, 2021 158

  • Revenue increased from US$83k to US$2.7mn in 1H21, contributed by manufacturing of nano-fibre oil-absorbent materials for JV Company and one-off sale of gasoil.
  • Higher share of JV profits from United Oil Company (UOC), which increased 50% YoY to US$3.4mn.

The Positives

+ Revenue and PATMI growth. Revenue increased from US$83k to US$2.7mn in 1H21. This was contributed by the manufacturing of nano-fibre oil-absorbent materials for JV company, M-TechX United Pte Ltd, and a one-off sale of gasoil.

+ Higher share of JV profits. Share of JV profits increased 50% to US$3.4mn, contributed by UOC, its 60:40 JV with Repsol. UOC’s revenue and profits were US$66.2mn and US$6.6mn, up 94.8% and 71.9% respectively. Its revenue increase came from higher sales volumes and ASPs on the back of a better Covid-19 situation in 1H21.

 

The Negative

– Gross loss. Gross loss of US$155k was higher than the group’s S$133k loss in 1H20, by 16.5%. As revenue improved, cost of sales also surged, from US$216k in 1H20 to US$2.9mn. As nano-fibre oil-absorbent manufacturing operated at low production rates due to slow orders, it was unable to generate sufficient revenue to cover non-cash expenses of depreciation of property, plant and equipment.

 

Outlook

Lubricant business. Through the JV, UGL intends to leverage Repsol’s international brand presence to accelerate the growth and regional expansion of UOC.

Prior to its divestment of a 40% stake in UOC in 2019, United Global derived 90% of its revenue from Asia and about 50% from Southeast Asia. Management is expecting tougher business conditions, particularly with new Covid-19 variants in the region.

Another risk is the price of crude oil, a key ingredient in the blending of lubricants. Freight costs may also escalate, which could dampen UGL’s growth.

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Vivian Ye
Research Analyst
Phillip Securities Research Pte Ltd

Vivian covers the small and mid cap stocks. Previously with the Credit Analyst team at a bank, she prepared credit reviews through conducting financial analysis and stress tests on local SMEs, and collaborated with Relationship Managers to prepare credit reports. She graduated with a Bachelor of Business from Nanyang Technological University, where she specialized in Banking and Finance.

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