Sound Global

Sound Global: SCB hosted a conference Call for the co. Co. sees upside in industrial wastewater and in rural China, and has strategically positioned itself in rural areas around China to provide WWT for industrial co's. Given industrial WWT requires higher standards and technology, many petrochemical companies are outsourcing WWT to third parties like SGL. Mgt also commented that in the past, monitoring and penalty on water pollution was relatively weak. Add that officers from the Ministry of Environmental Protection (MEP) proposed to issue limited licenses to professional WWT co's to take responsibility in certain regions of China. However, mgt thinks that this could be a mid to long-term trend for the whole industry, and could take 5-10 yrs for about 40-50% of the heavy industry to outsource its entire WWT requirement. At 8x 2013E PER, the stock is trading 44% below its mid-cycle valuation and remains attractive in comparison to its peers. Expansion in the BOT segment could provide a rerating opportunity in the long term.