CITIC ENVIROTECH LTD.
CEE.SI
CITIC ENVIROTECH (CEL SP) - Rmb3b Mega Project Cements Confidence In S$1b Of Upcoming Projects
- CEL announced a mega project that will focus on river restoration in Ningbo City, China with a value of Rmb3b. This, together with April Rmb434m wins, it will support our S$1b (Rmb4.9b) project win target. Therefore, we believe that the recent share price dip offers investors a chance to collect below CITIC’s and near CRF’s buy price.
- Re-reiterate BUY with target price unchanged.
WHAT’S NEW
Rmb3b mega project win in Ningbo.
- CEL just announced that it has secured a Rmb3b (approximately S$610m) Build Transfer project in Feng Hua District, Ningbo City, China for the restoration of rivers and the surrounding environment.
A JV project with CEL taking 77.5% interest.
- This mega project will be a JV project in which CEL will have an effective 77.5% interest (through a 60% direct stake and a 50:50 JV called CITIC Oasis which holds a 35% stake), followed by Wuxi Oasis with 17.5% (state-owned enterprise which provides river restoration, soil rehabilitation and water pollution control expertise), and 5% to the local government.
First phase of the project worth Rmb1.4b will begin immediately.
- Phase I of the project is worth around Rmb1.4b (S$280m) and is expected to begin immediately. It will involve river restoration works on 25 rivers and its surrounding landscape.
- Funding for the project will be from the issuance of the US$180m senior perpetual securities.
STOCK IMPACT
Mega Rmb3b project win cements our confidence in S$1b project win target.
- Together with its earlier April project wins of Rmb434m, the new Rmb3b mega win cements our confidence in CEL’s S$1b (Rmb4.9b) target win from upcoming projects.
- Given an expected Rmb900b worth of new projects upcoming for the industry in China for 2017 and a 9% annual growth going forward for the industry, we believe this strong order win momentum will be sustained and CEL will continue to announce further wins in 2017.
- We look forward to order wins in the area of hazardous waste/sludge treatment and management and circular economy (循环经济).
Price dip offers opportunity to acquire below CITIC’s and close to new investor CRF’s buy price.
- CEL’s recent price dip offers investors an opportunity to acquire below CITIC’s buy price of S$0.825 (adjusted) for the former United Envirotech and close to China Reform Fund’s (CRF) entry point of S$0.725.
EARNINGS REVISION/RISK
- No change to earnings forecasts.
VALUATION/RECOMMENDATION
- Maintain BUY and S$1.10 DCF-based target price on the back of:
- CEL’s order win momentum,
- advanced membrane technology, and
- China’s continued focus and efforts towards combating environmental pollution.
SHARE PRICE CATALYST
- New contract wins. Further contract wins will silence any doubts in CEL’s S$1b target.
Edison Chen
UOB Kay Hian
|
Nicholas Leow
UOB Kay Hian
|
http://research.uobkayhian.com/
2017-05-19
UOB Kay Hian
SGX Stock
Analyst Report
1.100
Same
1.100
