SINGAPORE (July 6): UOB Kay Hian is maintaining its “buy” call on CITIC Envirotech (CEL) with a target price of $1.10, noting that its current share price has reached attractive levels as the group remains on track to delivering record results.
In a Thursday report, analysts Edison Chen and Nicholas Leow observe how the counter’s share price has dipped to the lowest this year to nearly match its strategic shareholder’s entry levels.
“CEL’s current share price allows investors to acquire shares below the CITIC Group’s acquisition price of $0.825 (adjusted) and close to China Reform Fund’s (CRF) entry level of $0.725,” they explain.
CITIC Group and the CRF are both Chinese state-owned investment companies, and collectively own more than 78% of CEL.
Citing data from BMI Research, the analysts believe this presents a buying opportunity for investors looking to “position in an industry that is project to account for more than RMB900 billion ($182.8 billion) in major water project investments by end-2017, with a 9% annual growth between 2017 and 2021”.
Their positive views on CEL’s prospects are further reinforced with the group’s special membrane bioreactor (MBR) technology, which is capable of shorter retention times; lower land requirements; and higher water quality output as compared to technologies of similar capabilities.
“Investors will be buying into the best in class with superior technology know-how protected by a suite of intellectual property rights,” state Chen and Leow.
Lastly, given the recent approval of CEL’s share purchase mandate in May this year, the analysts think there is a likely possibility that the group may buy back shares in the near future.
“Looking at its current progress, we are confident that CEL will meet or even exceed the internal target of securing $1 billion in new project wins for 2018 as the Chinese government aims to meet targets set under the Water Pollution Prevention and Control Action Plan… With $1 billion in new project wins, we believe CEL is on track for a record year,” they add.
As at 9.20am, shares of CEL are trading 0.7% higher at 75 cents.
