SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
<div></div>
<div>
<h2>United Global Ltd</h2>
<h3>Lubricated engines</h3>
<div>
<ul>
<li>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.</li>
<li>Higher share of JV profits from United Oil Company (UOC), which increased 50% YoY to US$3.4mn.</li>
</ul>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/302/original/image_270904452121635862805228.png?1635862808" class="editor-image img-responsive" data-smartkarma-image-id="239302"></figure>
<p><strong>The Positives</strong><br><strong>+ Revenue and PATMI growth.</strong><span style="font-size: var(--content-font-size);"> 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.</span></p>
<div>
<p><strong>+ Higher share of JV profits.</strong> 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.</p>
<p><strong>The Negative</strong><br><strong>- Gross loss.</strong> 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.</p>
<p><strong>Outlook</strong><br><strong>Lubricant business.</strong> Through the JV, UGL intends to leverage Repsol’s international brand presence to accelerate the growth and regional expansion of UOC.</p>
<p><strong>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.</strong> Management is expecting tougher business conditions, particularly with new Covid-19 variants in the region.</p>
<p><strong>Another risk is the price of crude oil, a key ingredient in the blending of lubricants.</strong> Freight costs may also escalate, which could dampen UGL’s growth.</p>
</div>
</div>
</div>

Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.


United Global Ltd
Lubricated engines


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.




(Non-SGX Report) United Global Ltd: Lubricated Engines

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX</strong></em>.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</p>
<div>
<div>
<div>
<div>
<h2>United Global Limited</h2>
<h3>Renewed energy</h3>
<div>
<div>
<div>
<div>
<ul>
<li>UGL intends to leverage its new 60:40 JV with Repsol in UOC to expand UOC’s scale and reach. UOC’s revenue dropped 18.2% YoY in FY20 due to lower manufacturing ASP and trading revenue but gross margins improved 5.3 ppts.</li>
<li>Global lubricant market projected to reach US$182.6bn by 2025. Growth in ASEAN expected to be 2.0% CAGR from 2019 to 2029, with growth accelerating from 2024 as its developing economies recover from the pandemic.</li>
</ul>
<div>
<div>
<div>
<div>
<p><strong>Company background</strong></p>
<p>UGL is an established, independent lubricant manufacturer with a wide range of high- quality, well-engineered products under its in-house “United Oil” brand and a host of third- party brands. It also trades base oils, additives and lubricants.</p>
<p>Through its 60%-owned United Oil Company (UOC), its new JV with Madrid-listed oil major Repsol (REP SM, Not Rated), the group manufactures a wide range of lubricants and specialty fluids for the automotive, industrial and marine industries. These are distributed to about 40 countries.</p>
<p>UGL has four other businesses: United Innovations, United Supply Chain, United Renewables and United Fuels.</p>
<div>
<div>
<div>
<div>
<p><strong>Highlights</strong></p>
<ol>
<li><strong>Leverage JV with Repsol</strong>. UOC was a 100% subsidiary of UGL before UGL divested a 40% stake in it to Repsol in November 2019. UOC contributed US$5.39mn to UGL’s net profit in FY20. Its revenue fell 18.2% YoY to US$89.7mn due to lower manufacturing ASPs and trading revenue. However, gross profit increased 3.8% to US$22.5mn on the back of a 5.3ppt improvement in gross margins to 25.1%. Manufacturing margins improved with the help of lower raw-material costs while trading benefitted from higher ASPs. UGL’s network of distributors spans 40 countries. It intends to leverage Repsol’s international brand presence to accelerate the growth and regional expansion of UOC.</li>
<li><strong>Global lubricant industry continues to expand</strong>. The global lubricant market is projected to reach US$182.6bn by 2025, from US$157.6bn in 2020. This would translate to a CAGR of 3.0%. ASEAN, where UOC derived about 55% of its FY19 revenue, is expected to remain heavily dependent on lubricants. Automotive lubricants account for a larger share of the market than industrial lubricants because the region is not yet fully industrialised. Overall lubricant demand in ASEAN is expected to grow at a moderate 2.0% CAGR from 2019 to 2029. Growth rates are expected to gather pace from 2024 to 2029, as ASEAN’s developing economies recover from the pandemic.</li>
</ol>
<p>Ample means for expansion. UGL has had net cash since its listing in 2016. As at 31 December 2020, net cash was S$9.7mn. The company has also remained debt-free since 4QFY19. This puts UGL in a comfortable position to pursue future acquisitions or business expansion.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




United Global Limited
Renewed energy





UGL intends to leverage its new 60:40 JV with Repsol in UOC to expand UOC’s scale and reach. UOC’s revenue dropped 18.2% YoY in FY20 due to lower manufacturing ASP and trading revenue but gross margins improved 5.3 ppts.
Global lubricant market projected to reach US$182.6bn by 2025. Growth in ASEAN expected to be 2.0% CAGR from 2019 to 2029, with growth accelerating from 2024 as its developing economies recover from the pandemic.





Company background
UGL is an established, independent lubricant manufacturer with a wide range of high- quality, well-engineered products under its in-house “United Oil” brand and a host of third- party brands. It also trades base oils, additives and lubricants.
Through its 60%-owned United Oil Company (UOC), its new JV with Madrid-listed oil major Repsol (REP SM, Not Rated), the group manufactures a wide range of lubricants and specialty fluids for the automotive, industrial and marine industries. These are distributed to about 40 countries.
UGL has four other businesses: United Innovations, United Supply Chain, United Renewables and United Fuels.




Highlights

Leverage JV with Repsol. UOC was a 100% subsidiary of UGL before UGL divested a 40% stake in it to Repsol in November 2019. UOC contributed US$5.39mn to UGL’s net profit in FY20. Its revenue fell 18.2% YoY to US$89.7mn due to lower manufacturing ASPs and trading revenue. However, gross profit increased 3.8% to US$22.5mn on the back of a 5.3ppt improvement in gross margins to 25.1%. Manufacturing margins improved with the help of lower raw-material costs while trading benefitted from higher ASPs. UGL’s network of distributors spans 40 countries. It intends to leverage Repsol’s international brand presence to accelerate the growth and regional expansion of UOC.
Global lubricant industry continues to expand. The global lubricant market is projected to reach US$182.6bn by 2025, from US$157.6bn in 2020. This would translate to a CAGR of 3.0%. ASEAN, where UOC derived about 55% of its FY19 revenue, is expected to remain heavily dependent on lubricants. Automotive lubricants account for a larger share of the market than industrial lubricants because the region is not yet fully industrialised. Overall lubricant demand in ASEAN is expected to grow at a moderate 2.0% CAGR from 2019 to 2029. Growth rates are expected to gather pace from 2024 to 2029, as ASEAN’s developing economies recover from the pandemic.

Ample means for expansion. UGL has had net cash since its listing in 2016. As at 31 December 2020, net cash was S$9.7mn. The company has also remained debt-free since 4QFY19. This puts UGL in a comfortable position to pursue future acquisitions or business expansion.

















(Non-SGX Report) United Global Limited: Renewed Energy

Singapore

United Global Limited manufactures and markets petroleum lubricants. The Company, through its subsidiary, offers its products to customers located in the Asia Pacific region.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

United Global Ltd (UTG SP)

(Non-SGX Report) United Global Ltd: Lubricated Engines

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

(Non-SGX Report) United Global Limited: Renewed Energy

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)