SIIC ENVIRONMENT HOLDINGS LTD
5GB.SI
Expecting a much stronger 2H
- 1H results in line; 2H is expected to be much stronger.
- Expect SIIC to remain aggressive in 2H and beat management guidance on full year acquisition target.
- Maintain BUY with unchanged TP SGD0.26.
Results in line
- SIIC’s 2Q15 revenue declined by 5% YoY and net profit increased by 26% YoY. 1H net profit formed 42% of our forecast.
- We consider the results in line as we expect 2H to be much stronger than 1H. The decline in revenue was mainly due to 34% drop in construction because of lower construction activities this quarter.
- Water treatment revenue remained robust at 17% growth. GPM improved from 36.7% to 43.5% YoY as water treatment business enjoys better margin than construction.
Best execution YTD; maintain BUY
- SIIC has executed the best among the water companies under our coverage so far this year. It has secured 1.3m tonnes of new capacity YTD.
- We expect SIIC to remain aggressive for the rest of the year, which could make the full year acquisition size much higher than management’s guidance of 1.5m tonnes at the beginning of this year.
- We also believe that 2H results will be much stronger than 1H, with over 40% HoH growth.
- It will be mainly driven by a few factors, including Fudan Water which was consolidated in June, higher construction revenue due to the construction of Wuhan Hanxi Phase 2 project, higher JV/associates contribution as Pucheng solid waste incineration plant completes maintenance and resumes operation, as well as new concessions acquired in the past few months.
- Management mentioned that dual-listing in HK is still on the cards but the company must become much bigger before moving to HK.
- Full benefit of past acquisitions will be seen in FY16E onwards.
- We keep our earnings forecasts unchanged and reiterate our BUY call with unchanged TP of SGD0.26, pegged to 30x FY16E P/E.
Wei Bin | http://www.maybank-ke.com.sg/ Maybank KE 2015-08-13
0.26
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