SINGAPORE (Dec 15): UOB KayHian says CITIC Envirotech’s (CEL) recent price correction offers investors a buying opportunity.
CEL's share price has fallen from a recent high of 79 cents on Nov 2 to 73 cents now. That's below or around the 82.5 cent and 72.5 cent price level entered in by strategic investors CITIC and China Reform Fund recently.
"With CEL’s stellar 3Q17 results, there are no fundamental reasons supporting such a price correction. A 30% dividend payout is also to be expected for 2017, likely to be announced around Feb 18," says UOB lead analyst Edison Chen in a Wednesday report.
Management has revealed it is bidding for multiple megaprojects and is confident of winning some projects. With CEL exceeding its $1 billion 2017 project wins target by about 50%, Chen believes CEL can deliver at least another $1 billion in project wins in 2018, sustaining its project win momentum.
After reviewing macro conditions, Chen does not expect major negative changes for CEL in 4Q17. As such, he expects Chen to continue to deliver stellar results, with a significant chance of beating UOB's forecast and ending 2017 with a bang.
Meantime, Chen expects recurring water treatment growth to catch up with engineering’s in 2018. While current growth from recurring water treatment is lower than that from the engineering segment, Chen notes the time lag between engineering projects’ start and completion.
"As such, we believe that the engineering segment’s 2017 growth will lead to a huge jump in 2018’s recurring water treatment profits and recurring water treatment income growth of 52.9% in 2018," says Chen.
"We think 4Q17 and beyond will continue to be stellar with recurring income catching up in 2018, rising 52.9%. Maintain 'buy' and target price of $1.10," adds the analyst.
As at 10.06am, shares in CEL are trading 1 cent higher at 73 cents or 10.4 times FY18 forecast earnings.
