SINGAPORE (Aug 14): RHB is maintaining its “buy” call on SIIC Environment with a target price of 82 cents on the back of a positive growth outlook following the group’s 2Q17 results.
SIIC reported a 79% increase in second quarter revenue, while operating profit more than doubled.
This was mainly due to the acquisition of Longjiang Environmental Protection (Longjiang Group) and Ranhill Water (Hong Kong) (RWHK) last year.
This led 2Q17 PATMI to increase 19% y-o-y to RMB120 million ($24.5 million).
See: SIIC Environment 1H17 earnings up 26% to $49 mil
However, the group faced higher finance expenses due to higher-interest bearing debt and higher gearing of Longjiang Group, which dragged down its 2Q17 operating profit.
Management says that it has refinanced a portion of the debt with interest costs up to 6-4%.
In a Monday report, analyst Juliana Cai says that this will however take the group another six month to a year to cover all over Longjiang Group’s debts.
The group has secured 540,000 tonnes of daily wastewater and water treatment capacity. Out of this, 200,000 tonnes are already operational.
“This is on track, with management’s historical guidance to grow 1- 1.5m tonnes of daily treatment capacity each year,” says Cai.
The analyst remains to be positive on the group’s outlook given that the majority of its construction projects have already completed and are moving into operational phase.
Paired with newly-secured contracts, Cai believes that this will help the group’s growth in the near term.
As at 10.43am, shares in SIIC Environment are trading at 46 cents.
