Despite United Global’s positive set of results for 1HFY2021 ended June 30, analysts have continued to be less than optimistic on the engine lubricant company.
SAC Capital has maintained its “hold” rating for the stock with an unchanged target price of 44.5 cents.
On Aug 11, United Global reported a 91.9% surge in earnings to about US$3.2 million in 1HFY2021 from a year ago.
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Its revenue soared 94.8% y-o-y to $66.2 million on the back of higher sales volume and higher average selling price achieved.
In a note dated Aug 12, SAC says it does not expect any “significant upward” share price re-rating given the lack of near-term catalyst and earnings visibility from United Global’s new businesses.
The company has identified logistics/shipping businesses, trading of petrol related products and materials recycling as new business segments to grow recurring revenue.
SAC says these businesses are unlikely to contribute significantly in the next two years.
Moreover, the cash contribution to United Global is limited to dividend distribution from its lubricant business, though it is likely to benefit from the global economic recovery post-COVID.
Meanwhile, Phillip Securities – in an Aug 12 report – points out that higher crude oil prices is a key risk for United Global given that it is a “key ingredient” in the blending of lubricants.
The brokerage also notes that freight costs may escalate, which could dampen the company’s growth.
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Phillip does not have a rating nor target price for the stock.
Shares of United Global were last traded at 40 cents on Aug 12.
