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24-02-2014, 08:01 PM
(This post was last modified: 24-02-2014, 08:04 PM by CityFarmer.)
Updated OSK-DMG after a Roadshow. The TP should be still $0.161.
Hankore without CEI, is not appealing at all. At the current price, the upside already priced-in. So I will give it a miss as special situation investment for the moment. Pending further update, valuation might change, and I will reconsider then.
I agree wit the analyst on the quality of asset owned by CEI, but the funding cost might not necessary cheaper. May be no more cheap funding from state, thus CEI needs to seek funds in SGX...
(not vested)
---------------
HanKore Environment: Highlights From The Non-Deal Roadshow
(BUY, SGD0.123, TP: SGD0.123)
Sarah Wong, +65 6232 3883 (sarah.wong@sg.oskgroup.com)
Terence Wong, CFA, +65 6232 3896 (Terence.wong@sg.oskgroup.com)
HanKore Environment Tech (Hankore) chairman David Chen and
ED/CFO Felix Yau participated in our 19 Feb non-deal roadshow (NDR)
in Singapore. We have a BUY rating on the company with a SGD0.161
TP that is based on 25x FY15F P/E. Hankore’s strong points include
further progress in its merger with CEI, potentially lower financing
costs and solid asset quality.
Merger with China Everbright International or CEI (257 HK, NEUTRAL,
TP: HKD9.04) on track. As reiterated earlier, Hankore’s merger with CEI is
making good progress. The injection of the latter’s assets should take place
going into FY15 and will bring the former’s combined capacity to ~3.6m
tonnes/day. The union between HanKore and CEI is a highly
complementary one, given the location of their water assets. Each has a
foothold in Jiangsu and Shandong, which are amongst China’s provinces
with the highest GDP growth levels.
State backing to lower HanKore’s financing cost. With CEI – a stateowned
enterprise (SOE) backed by the State Council of China – as
HanKore’s parent, we will see the company’s financing costs fall to ~4%
from 7.5% currently. This will give rise to cost savings as well as provide
the company with higher returns on its wastewater treatment investments.
Asset quality to be key differentiator. HanKore’s existing 11 wastewater
treatment plants, which have design capacities of ~155,000 tonnes/day on
average, are the key large-sized plants in their respective regions. These
plants have the potential to tap on rising economies of scale and operating
leverage as they grow in operating capacity, thereby outperforming other
plants of smaller scale through greater cost efficiencies.
Re-rating in motion. Maintain BUY with SGD0.161 TP. We believe that
as HanKore draws closer to completing its merger with CEI, its valuations
will re-rate. This process is already underway. At the current price of
SGD0.123, the stock is trading at a 19x FY15 P/E (incorporating CEI’s
asset injection), compared with the peer average of 30x. Maintain BUY,
with our SGD0.161 TP based on a 25x FY15 P/E.
Ref: http://remisiers.org/cms_images/research...atters.pdf
Hankore without CEI, is not appealing at all. At the current price, the upside already priced-in. So I will give it a miss as special situation investment for the moment. Pending further update, valuation might change, and I will reconsider then.
I agree wit the analyst on the quality of asset owned by CEI, but the funding cost might not necessary cheaper. May be no more cheap funding from state, thus CEI needs to seek funds in SGX...
(not vested)
---------------
HanKore Environment: Highlights From The Non-Deal Roadshow
(BUY, SGD0.123, TP: SGD0.123)
Sarah Wong, +65 6232 3883 (sarah.wong@sg.oskgroup.com)
Terence Wong, CFA, +65 6232 3896 (Terence.wong@sg.oskgroup.com)
HanKore Environment Tech (Hankore) chairman David Chen and
ED/CFO Felix Yau participated in our 19 Feb non-deal roadshow (NDR)
in Singapore. We have a BUY rating on the company with a SGD0.161
TP that is based on 25x FY15F P/E. Hankore’s strong points include
further progress in its merger with CEI, potentially lower financing
costs and solid asset quality.
Merger with China Everbright International or CEI (257 HK, NEUTRAL,
TP: HKD9.04) on track. As reiterated earlier, Hankore’s merger with CEI is
making good progress. The injection of the latter’s assets should take place
going into FY15 and will bring the former’s combined capacity to ~3.6m
tonnes/day. The union between HanKore and CEI is a highly
complementary one, given the location of their water assets. Each has a
foothold in Jiangsu and Shandong, which are amongst China’s provinces
with the highest GDP growth levels.
State backing to lower HanKore’s financing cost. With CEI – a stateowned
enterprise (SOE) backed by the State Council of China – as
HanKore’s parent, we will see the company’s financing costs fall to ~4%
from 7.5% currently. This will give rise to cost savings as well as provide
the company with higher returns on its wastewater treatment investments.
Asset quality to be key differentiator. HanKore’s existing 11 wastewater
treatment plants, which have design capacities of ~155,000 tonnes/day on
average, are the key large-sized plants in their respective regions. These
plants have the potential to tap on rising economies of scale and operating
leverage as they grow in operating capacity, thereby outperforming other
plants of smaller scale through greater cost efficiencies.
Re-rating in motion. Maintain BUY with SGD0.161 TP. We believe that
as HanKore draws closer to completing its merger with CEI, its valuations
will re-rate. This process is already underway. At the current price of
SGD0.123, the stock is trading at a 19x FY15 P/E (incorporating CEI’s
asset injection), compared with the peer average of 30x. Maintain BUY,
with our SGD0.161 TP based on a 25x FY15 P/E.
Ref: http://remisiers.org/cms_images/research...atters.pdf
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