SINGAPORE (Dec 29): DBS Group Research is maintaining its "hold" rating on CITIC Envirotech with 80 cents target price.
In a Friday report, analyst Patricia Yeung says CITIC Envirotech needs to accelerate construction progress to enhance its earnings growth outlook.
This despite CITIC Envirotech winning more than RMB 10 billion ($2.05 billion) in new contracts year to date with new initiatives in the hazardous waste treatment market.
On Thursday night, CITIC Envirotech announced in a filing it had issued 83.2 million new shares at 85 cents each to New Resources.
The net proceeds of $70.7 million will be used to fund its projects and for general working capital.
The new shares account for 3.5% of CITIC Envirotech's enlarged share capital. The placement price presents 14.8% premium to the weighted average price of 74.07 cents of all the trades done on Wednesday.
Yeung says, "We reckon the market will react positively to the share placement in the short term, given the high placement price. We estimate CITIC Envirotech's net debt-equity ratio to remain in the single digit after the placement."
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 -- a state-owned enterprise engaged in the construction and operation of highways, bridges, railways, shipping logistic -- and China Everbright Finance.
China InnoVision Capital is an investment fund and founder and CEO, Zhao Fu, was a former director of CITIC Envirotech.
"We reckon the new shareholder can help CITIC Envirotech to broaden its financing channels." adds Yeung.
As at 3.56pm, shares in CITIC Envirotech are down 1 cent at 74 cents or 14.8 times FY18 earnings.
