Tuesday, January 29, 2013
Hyflux / Sound Global
Water & Environment / Hyflux / Sound Global: SCB has sector report. House note that the outlook for stocks in the waste, water and environment sectors should improve, aided by recent positive policies in relation to the sector. China’s Ministry of Environmental Protection issued guidance for the 12th Five Year Plan (2011-15) with estimated 30% annual growth in the markets for environmental protection, including treating solid waste, wastewater and sludge, and de-sulphurisation and de-nitration. Add that more projects in environmental protection could materialize in 2013, especially in waste-to-energy (WTE), which still lags behind the central government‘s target for 2015, and is poised to grow at a 28% CAGR during 2011-15. Pricing liberation is also progressing after years of stagnant development, as several municipal governments have started charging solid waste treatment fees, collected from residents through tap water suppliers. Recommend that investors accumulate on weakness as long-term thesis is intact. Wastewater treatment is becoming increasingly competitive but rising tariffs maintain project IRRs. In this segment, ike Beijing Enterprises Water, followed by China Water Affairs. House has an O/p Rating on Sound Global with $0.86 TP & In-line on Hyflux with $1.70 TP.