Sound Investment

01 Feb 2021 14:06 #25611 by Rock
Replied by Rock on topic Sound Investment

Union Gas has not yet reach its peak growth potential. It's business supplies three forms of fuel:

Liquid Petroleum Gas (LPG)
Compressed Natural Gas (CNG)

It’s customers base are residential and commercial.

Since IPO in 2017 Union Gas had acquired and added new businesses every year:

In April 2018 acquired Semgas supply.
In May 2017 Expanded into commercial business for LPG, mainly to Hawker centres, growing from zero to 45 Hawker centres in just a few years.
January 2018 Union Gas Holdings incorporated Union LPG Pte Ltd to provide fuel for more commercial customers such as coffee shops and central kitchens.
In 2017, it launched the UNIONSG mobile app to help streamline the order process and provide cashless payment options for all its customers.

Union Gas had license to supply and retail pipe natural gas (PNG) and liquid natural gas (LNG) since 2017 but made decision to focus on growing and expanding their existing business to gain momentum to be on the right trajectory of growth.

In November 2020 the Group secured contracts to supply PNG to 4 customers who hail from the packaging, food production, hospitality and waste management industries.

The Group has also signed a letter of intent with a potential fifth customer to conduct technical and feasibility studies to supply LNG to its food production plant.

As Union Gas existing business has since gained sufficient traction are now ready to revisit the plans to offer PNG and LNG and promulgate this gas as a viable, sustainable and environmentally friendly alternative fuel.

Following the entering into the contracts, PNG and LNG form the Group’s fourth fuel product.

Between its financial years ended 31 December 2017 and 2019, Union Gas’ revenue and net profit grew at a compound annual growth rate of 41.8% and 55.6% respectively.

Despite the COVID-19 pandemic situation in 2020, the Group achieved strong performance for the six months ended 30 June 2020 with net profit surging 76.7% year-on-year to S$7.0 million on the back of revenue which rose 27.2% to S$43.2 million.

The Group’s healthy showing in recent years was mainly attributed to strong sales of LPG to domestic customers and its entry into the supply of LPG to commercial customers.

The new PNG and LNG business will fuel its future business growth.

Price @ 53 cents;
PE = below 10x
Yield = about 5% (50% payout)

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