CITIC Envirotech Ltd (CEL SP) - DBS Research 2017-12-29: Share Placement At A Premium

CITIC Envirotech Ltd (CEL SP) - DBS Vickers 2017-12-29: Share Placement At A Premium CITIC ENVIROTECH LTD. CEE.SI

CITIC Envirotech Ltd (CEL SP) - Share Placement At A Premium

  • Share placement of 83.2m new shares at 14.8% premium.
  • New shareholder helps broaden financing channels.
  • Net debt to equity ratio remains in the single digit.
  • Maintain HOLD with TP unchanged at S$0.80.

What's New 

  • CITIC Envirotech (CEL SP) entered into an agreement to place 83.2m new shares to New Resources at S$0.85 per share yesterday. The new shares account for 3.6% of the existing share capital or 3.5% of the enlarged share capital.
  • The placement price presents 14.8% premium to the weighted average price of S$0.7407 of the previous trading day. Net proceeds of S$70.7m will be used to fund CEL’s projects and general working capital. 
  • We reckon the market will react positively to the share placement in the short term, given the high placement price. We estimate CEL’s net debt-equity ratio to remain in the single digit after the placement.
  • The shareholders of New Resources are Shandong Hi-speed CE and China InnoVision Capital. Shandong Hi-speed CE is a fund set up by Shandong Hi-speed (an SOE, mainly engaging in investment, construction and operation of highways, bridges, railways, shipping logistic, etc) and China Everbright Finance. China InnoVision Capital is an investment fund and founder and CEO, Mr Zhao Fu, was a former director of CEL. We reckon the new shareholder can help CEL to broaden its financing channels.
  • While CEL has recently secured more projects with YTD project wins of > Rmb10bn with new initiatives in the hazardous waste treatment market, CEL needs to accelerate construction progress to enhance its earnings growth outlook. 
  • We maintain our HOLD rating with TP of S$0.80.

Patricia YEUNG DBS Vickers | 2017-12-29
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 0.80 Same 0.80