Shares in United Envirotech Ltd jumped as much as 14.6 percent to their highest in eight years, after U.S. buyout firm KKR & Co LP agreed to make a $40 million follow-on investment in the China-focused water treatment and recycling company.
By 0154 GMT, United Envirotech shares were up 9.7 percent at S$0.565, with 10.7 million shares traded, 2.5 times their average daily volume over the last five sessions.
KKR said on Tuesday it will buy shares in United Envirotech at S$0.50 per share, which represents an 8.5 percent premium to the volume weighted average price for the last 30 trading days.
“With such a big and well-known fund investing in United Envirotech, it gives a sign of confidence to investors,” said a local trader, adding that the company will be able to use the funds to invest in new earnings accretive water projects.
In 2011 KKR, which manages about $66 billion globally, invested $113.8 million in United Envirotech through convertible bonds.
However, the trader noted that the potential dilution resulting from a conversion of the bonds could limit further upside in United Envirotech’s share price.
(Reporting by Charmian Kok in Singapore; Editing by Jijo Jacob; firstname.lastname@example.org)
9:11 STOCKS NEWS SINGAPORE-UBS downgrades Olam to ‘sell’ from ‘buy’
UBS downgraded Olam International Ltd to ‘sell’ from ‘buy’ and cut its target price to S$1.33 from S$2.95, citing uncertainties around the cost of its Gabon project.
Olam shares were down 0.3 percent at S$1.60 by 0100 GMT, around 8 percent below the level they were at before short-seller Muddy Waters launched an attack on the commodities trading company for its accounting practices and aggressive acquisitions.
UBS said the World Bank now estimates the total cost of the Gabon project to be at $1.5 billion to $2 billion, compared with Olam’s initial estimate of S$1.3 billion.
“A cost overrun and project delays significantly increase the risk to management’s target of turning free cash flow positive by 2015,” said UBS in a note.
The brokerage also said its bankruptcy analysis of Olam shows the company’s financial position has deteriorated to below financial health levels, but remains above distress levels.
“A number of concerns have arisen in recent months,” said UBS, including Olam’s earnings quality and growth, deteriorating returns on asset investment, the risk of Nigerian export credit write-downs, management compensation, the recent share buyback considering its capacity expenditure requirements and negative free cash flow.