SIIC ENVIRONMENT HOLDINGS LTD
BHK.SI
SIIC Environment Holdings - Go With The Current
- SIIC Environment remains our Top Pick amongst China’s municipal wastewater treatment players.
- Reiterate BUY, with a higher TP of SGD1.26 (from SGD1.18, 85% upside).
- We continue to like the company for its ability to grow organically while seeking large-scale acquisitions.
- We expect it to deliver a strong performance in FY16, led by growth in construction revenue and new acquisitions.
Growth target unchanged.
- Management maintained its capacity growth target of 1m-1.5m tonnes for FY16 in spite of the intensely competitive M&A environment in the water treatment industry.
- We think there may be better M&A opportunities this year, as the volatility in China’s stock market mellows down.
- With the country’s easing monetary policy and SIIC Environment’s low gearing, we believe the company has the financial capability to fulfil its growth targets.
Higher construction revenue in FY16.
- According to executive chairman Mr Zhou Jun, some of SIIC Environment’s planned projects were delayed in 2015. Hence, we expect the bulk of the construction works in Hanxi, Wuhu, Linghai and Dalian projects to be completed in 2016 and 2017 instead.
- With that, we project construction revenue to grow 25% this year.
Do not miss the boat!
- The stock is now trading at 14.6x FY16F P/E.
- We believe the market has oversold the stock. Hence, we reiterate our BUY call on SIIC Environment with a DCF-derived TP of SGD1.26.
- While this implies 27.5x FY16F P/E, we think this is justified as we expect EPS to grow at 30.5% over FY15-18F.
Juliana Cai
RHB Invest
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http://www.rhbinvest.com.sg/
2016-02-25
RHB Invest
SGX Stock
Analyst Report
1.26
Up
1.18
