Excerpts from analyst's report
SIIC Environment (fka Asia Water) now has a market cap of S$1.6 billion, having more than doubled its stock value in the past year. The stock has a trailing PE ratio of 27. Chart: FT.com
DBS Vickers initiates coverage of a "new rising star in China's water sector"
Analyst: Tan Ai Teng
New rising star in China’s water sector. SIIC is fast becoming one of the largest players in China’s water treatment and supply industry by design capacity.
The company is an owner and operator of water supply and wastewater treatment (WWT) facilities.
By the end of 2013, SIIC has quadrupled its total water treatment design capacity to 4m tons per day (tpd) from 1m in 2009. SIIC’s current portfolio of 44 projects across twelve provinces in China generates c.64% of total revenue.
The balance comes from construction revenue for internal facilities or development of third party water plants.
Growth amid rising tide and strong parent support. SIIC is 46.72% owned by Shanghai Industrial Holdings Ltd (SIHL), a state owned enterprise (SOE) which facilitates SIIC’s acquisitions and gives it access to capital at preferential rates, thus enabling the firm to leapfrog rapidly into China’s environmental industry.
Apart from growing organically with expansion and upgrading of its existing plants, SIIC will embark on acquisitions given its low net gearing of 0.3x and access to attractive funding rates. Asset injection by parentco is another pontential kicker.
Earnings CAGR of 49% from FY13F-FY15F. Faster than expected project ramp up or capacity additions ahead of our Rmb1.5bn assumed investment/capex will be potential earnings upside drivers.
BUY, TP S$0.25. Our sum-of-parts TP is based on 12x PE for Construction and 10-Year DCF valuation methodology for Water Treatment, using 8% WACC, zero terminal growth and flat tariff rates throughout the concession period.
Watch the ceremony marking SIIC Environment's upgrade to the mainboard in 2012 >>>
SIIC Environment (fka Asia Water) now has a market cap of S$1.6 billion, having more than doubled its stock value in the past year. The stock has a trailing PE ratio of 27. Chart: FT.comDBS Vickers initiates coverage of a "new rising star in China's water sector"
Analyst: Tan Ai Teng
New rising star in China’s water sector. SIIC is fast becoming one of the largest players in China’s water treatment and supply industry by design capacity. The company is an owner and operator of water supply and wastewater treatment (WWT) facilities.
By the end of 2013, SIIC has quadrupled its total water treatment design capacity to 4m tons per day (tpd) from 1m in 2009. SIIC’s current portfolio of 44 projects across twelve provinces in China generates c.64% of total revenue.
The balance comes from construction revenue for internal facilities or development of third party water plants.
Growth amid rising tide and strong parent support. SIIC is 46.72% owned by Shanghai Industrial Holdings Ltd (SIHL), a state owned enterprise (SOE) which facilitates SIIC’s acquisitions and gives it access to capital at preferential rates, thus enabling the firm to leapfrog rapidly into China’s environmental industry.
Apart from growing organically with expansion and upgrading of its existing plants, SIIC will embark on acquisitions given its low net gearing of 0.3x and access to attractive funding rates. Asset injection by parentco is another pontential kicker.
Earnings CAGR of 49% from FY13F-FY15F. Faster than expected project ramp up or capacity additions ahead of our Rmb1.5bn assumed investment/capex will be potential earnings upside drivers.
BUY, TP S$0.25. Our sum-of-parts TP is based on 12x PE for Construction and 10-Year DCF valuation methodology for Water Treatment, using 8% WACC, zero terminal growth and flat tariff rates throughout the concession period.
Watch the ceremony marking SIIC Environment's upgrade to the mainboard in 2012 >>>
Comments
acquisition of Longjiang Environmental Protection Group
& the impact on SIIC's stock price