SINGAPORE (Jan 9): UOB Kay Hian expects CITIC Envirotech's recent share placement to help secure the multiple mega projects management is bidding for.
"We believe CITIC Envirotech can deliver at least another $1 billion in project wins in 2018, sustaining its project wins momentum," says lead analyst Edison Chen in a Tuesday report.
In December, CITIC Envirotech sold 83.2 million shares to new partners who were willing to pay 85 cents for each share or at a 14.8% premium.
Chen says the new partners include China InnoVision Capital and an investment partnership between China Everbright and state-ownedShandong Hi-speed Group.
China Innovision Capital was set up by former KKR senior executive, Zhao Fu.
One of the first team members in KKR Asia, Zhao was instrumental in KKR’s investment in CITIC Envirotech, says Chen.
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"Now that he has returned and investing in CITIC Envirotech at a higher price is a testament to the potential of CITIC Envirotech's business, the bright outlook of the industry and a vote of confidence in CEL’s ability to perform," says Chen.
China Everbright International, part of China Everbright Group, owns SGX-listed China Everbright Water, one of CITIC Envirotech's closest rivals.
Whatever the case, Chen says $70.7 million placement funds will help CITIC Envirotech lower its gearing and take up more projects, thereby accelerating its growth rate.
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The well-connected investors will also expand CITIC Envirotech's already strong business network and open more doors and opportunities.
CITIC Envirotech's membrane technology seems to be the only current viable technology which fulfils China's long-term anti-pollution guidelines.
"We raise our 2017-19 net profit forecasts by 4.1%, 6.3% and 7.6% respectively as we believe the new partners will accelerate development," says Chen.
Shares in CITIC Envirotech are trading at 74 cents or 10.4 times FY18 earnings.
