Sound Global

[CityFarmer]

Ah, i must admit i didnt do much research on the WWT industry. I was just looking for some WWT companies after hearing the story of WWT in China (as you have described), before noticing this company. At that time, I thought the company had ROE that is better-than-peers and lower PE too, but stock kept falling so i forgot about it until now. I attributed the lower PE was due to the S-chip status in Singapore, and its smaller scale.
Im just more curious about the long payback. One report from Poems said about 10 years, another said about 8-10 years. Is this the norm for the industry? including other players like Hyflux? Coz the long payback means the company will need a lot of cash and long-term debt for liquidity, while being in negative FCF in the near term. It will probably lower the IRR of the projects too. Besides, the company still derives most of its revenue from building projects (instead of recurring income). While more projects, means more debt. That said, i certainly like that the company has the backing of IFC, a renowned investor.

First of all, SoundGlobal should be taken as H-Chip, instead of S-Chip, since it is listed in HK Exchange

The BOT project typically splits into 2 phases, construction phase and operation phase. Construction phase takes 1-3 years depend on size. Operation phase last till the full concession period. During construction phase, typically no payment received (depend on contract). The incurred cost will be recovered in operation phase, which typically take 8 years to break-even.

Beside BOT projects, there is another EPC projects which contribute significantly to the company. EPC projects' pay-back period is much shorter than BOT projects.

Yes, i agreed that it is capital-intensive biz. But it is a good biz with overall gross margin of more than 30%. Moreover concession receivable are charged with interest

The pay-back starts once in operation phase. SoundGlobal started its BOT biz around 2007, and more projects are already in operation phase. Base on 2011 AR, nine (9) projects are in operation phase. I anticipated more will move to operation phases after 2012, since bulk of projects are secured in year 2009/2010.

The share price keep falling in the last 1-2 years may due to the CB. Mr Market seem not in favor of the CB, which i concur. I am still doing my research on the rationality of redeem CB with the senior notes issued. Once done, i will share it