Why Has United Envirotech Ltd Jumped By 8% Today?

United Envirotech Ltd (SGX: U19) has gained some 7.72% today to S$1.39. With the rest of the market anaemic – the Straits Times Index (SGX: ^STI) actually ended the day with a slight 0.45% decline to 3,212 points – what might have trigged this nice rally in the company’s shares?

As it turns out, nothing has appeared to be a plausible reason for the huge jump in United Envirotech’s share price. Although the company had announced back in July that it is in preliminary talks regarding investors possibly acquiring its shares, there hasn’t been much progress on the situation.

One of the latest important pieces of information concerning the company was actually released back in August and it’s the firm’s first quarter earnings. United Envirotech had experienced stellar growth with a 50.5% year-on-year jump in its revenue; net income followed suit with a 274% spike.

United Envirotech is an environmental solutions provider in the water and wastewater treatment industry. The company  has built many treatment plants in both China and Singapore and its wastewater recycling systems are currently used on Jurong Island to produce NEWater.

Another piece of recent important information released by United Envirotech deals with its joint-venture with Chengdu Xingrong Investment Co. Ltd, a state-owned enterprise from China. The JV would be working on wastewater treatment-related projects in China and the “total value of the first block of projects is estimated to exceed RMB 1.5 billion.” This announcement was made in early October.

The impressive growth in United Envirotech’s business and the new opportunities appearing with the JV did nothing much for the company’s shares as its share price had remained in a tight band around S$1.40 between June and early October.

The general market decline that started in the middle of this month was the event that set things moving with United Envirotech’s shares. Unfortunately, the movement was in the wrong direction as the company’s share price fell from S$1.40 at the end of September to less than S$1.20 per share at its October-low.

However, the decline proved to be short-lived as United Envirotech’s share price has since recovered most of the decline with the rally today. All told, it seems that the gains experienced by United Envirotech today might just be a simple recovery of the decline which happened a few weeks ago.

Foolish Bottom-Line

This could be an example of how fretting over short-term price movements might not be a productive endeavour for investors.

Instead, it could be a lot more useful to think about the long-term business future of a share. In United Envirotech’s case, the company is experiencing growing demand for its membrane-based water and wastewater systems and also possess a strong balance sheet (the company has a net debt to equity ratio of just 5.1% as of 30 June 2014). That could be a sign of the company possibly having better days ahead – and this assessment would still be the way it is regardless of whether United Envirotech had gained or lost a few percentage points today.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.