CITIC ENVIROTECH LTD
U19.SI
CITIC Envirotech - Optimising capital structure
- CEL announced a US$750m perpetual securities issuance programme. According to Bloomberg, there are also talks for a S$192m dividend recapitalization facility.
- The company is close to clinching Rmb1bn (S$225m) new water projects, which would drive future earnings growth.
- We keep our FY15-17 EPS and DCF-based target price. Reiterate Add.
US$750m perpetual securities issuance programme
- CEL recently announced that they would establish a US$750m multi-currency perpetual securities issuance programme. At an indicative pricing of around 5.45%, this could lower overall finance costs if used to retire some of its existing debt (average cost of 8.4% previously).
- Management guided that approximately US$175m will be utilised for its upcoming projects.
Project additions (PPP, TOT, BOT) to the pipeline
- On 18 Nov 2015, CEL also announced a few potential new projects in water supply, wastewater treatment and recycling, comprising a mix of industrial and municipal projects. These would be worth at least Rmb1bn (S$225m) and the company is currently in advanced stage of negotiations.
- We think negotiations may be completed by end-FY15 or early-FY16 and make meaningful revenue contribution in FY17.
KKR in talks for S$192m dividend recapitalisation facility for CEL
- There is Bloomberg/ Reuters news that Kohlberg Kravis Roberts (KKR) is in talks to seal a S$192m syndicated loan (3-year bullet) for CEL, the proceeds of which will be used for dividend recapitalisation.
- Assuming full payout, this could translate into special dividends to benefit all shareholders. As at end Sep 2015, CEL’s net gearing ratio was c.45.6%.
Maintain Add with unchanged DCF-derived target price of S$1.80.
- With the announced project additions to the pipeline, CEL is on track to attain our capex assumptions (FY15: S$225m, FY16-17: S$250m p.a.).
- We keep our FY15-17 EPS forecasts, DCF-based target price of S$1.80 (WACC: 6%) and Add rating, pending further clarity and details on the capital restructuring.
- We think an optimised capital structure will help improve CEL’s ROE and provide them with financial resources to seize investment opportunities.
NGOH Yi Sin
CIMB Securities
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Roy CHEN
CIMB Securities
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http://research.itradecimb.com/
2015-11-19
CIMB Securities
SGX Stock
Analyst Report
1.80
Same
1.80
