SIIC Environment - DBS Research 2016-09-01: Extending into industrial waste water treatment market

SIIC Environment (SIIC SP) - DBS Vickers 2016-09-01: Extending into industrial waste water treatment market SIIC ENVIRONMENT HOLDINGS LTD. BHK.SI

SIIC Environment (SIIC SP) - Extending into industrial waste water treatment market

  • Adding 260K tons of daily capacity; good progress in capacity expansion.
  • Extend into industrial waste water treatment segment.
  • Maintain BUY with TP of S$0.69.

What’s New 

  • SIIC announced to acquire 60% of Ranhill Water for Rmb273.9m which will be settled in cash. 
  • Ranhill Water is a subsidiary of Malaysian water and power conglomerate, Ranhill Holdings (RAHH MK), and is mainly engaged in the provision of industrial wastewater treatment (WWT) services, consultancy services on potable water, construction and operation of wastewater treatment and environmental protection facilities, etc. Its projects have a total designed capacity of 260,000 tons/day, located in different provinces in China, including Jiangxi, Anhui, Henan, Liaoning and Ningxia, etc.

Our View 

  • This transaction will bring the YTD new capacity to over 570,000 tons/day. Thus, this is on track to achieve its target of 1-1.5m tons/day. In addition, this deal allows SIIC to extend into the more profitable industrial WWT. Ranhill Water’s FY15 net profit reached Rmb30.2m, implying an acquisition PE of 15x which is not demanding.
  • Although SIIC has no exposure in comprehensive renovation treatment market, it is progressing well by gradually expanding its water treatment portfolio with good growth potential from upgrade and tariff hike. It is also extending into sludge treatment and industrial WWT market. 
  • Following a correction of 26% since April 16, current valuation looks attractive. We maintain BUY with TP of S$0.69, which is based on 25x FY17 PE (adjusted for construction revenue)

Patricia YEUNG DBS Vickers | 2016-09-01
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.690 Same 0.690