CHINA EVERBRIGHT WATER LIMITED
U9E.SI
China Everbright Water - A Good Entry Point Now
- China Everbright Water’s share price has been beaten down since early 2016 on weak market conditions.
- BUY, with a new DCF-based TP of SGD0.82 (from SGD0.81, 73% upside).
- We think the current price presents a good entry level, as there has been no change in its fundamentals.
- At the current low gearing level, we do not expect any issuance of new shares. Thus, its EPS growth should accelerate from this point onwards.
Pursuing new financing modes.
- To reduce investors’ concerns on potential high gearing and dilution from new shares issuance, China Everbright Water is exploring the option of establishing development funds to finance new projects. This would help to improve its financial ability to take on more projects while maintaining a healthy net gearing level.
Faster growth in FY16F.
- In line with management’s target to grow its total design capacity to 10m tonnes by FY19F, we expect the company to grow its capacity by 1.5m tonnes.
- Any new upgrading projects from hereon would be a key catalyst to boost growth.
- A key risk is an over-competitive acquisition environment, which may lead to a lower IRR.
Maintain BUY.
- We lift our FY17F net profit by 14% to reflect its new expansion and upgrading plans on existing projects, and introduce our FY18 numbers, to derive our new DCF-derived TP of SGD0.82, which implies a 23.7x 2016 P/E.
- We estimate EPS to increase at a 25% CAGR over the next three years.
Juliana Cai
RHB Research
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http://www.rhbinvest.com.sg/
2016-02-23
RHB Research
SGX Stock
Analyst Report
0.82
Up
0.81
