Water

Water: Water companies in Singapore are attracting big-name investors as they profit from exporting their expertise to China, which plans to spend US$850b over the next decade to improve its scarce and polluted water supplies. Singapore is a hub for water technology because of its own concerns about water security. "Singapore should be one of the world's dominant players in water. It should be the Silicon Valley of water," says Jim Rogers, who owns shares of Singapore's biggest listed water treatment company, Hyflux. Hyflux, which has a market cap of $1.2b, signed two agreements in April for projects in China. The company is known for its membrane technology used for ultrafiltration, a process to separate certain dirty or harmful particles in water. Hyflux's CEO, Olivia Lum, is the biggest shareholder with 32.4%, while Matthews International Capital Management and Mondrian Investment Partners have a combined 14.2%. U.S. private equity firm KKR invested US$40m in United Envirotech earlier this year after subscribing to US$113.8 million of its convertible bonds in 2011. The company is listed and based in Singapore, but most of its operations are in China, where it derives more than 90% of its revenue. It designs and builds water treatment plants, on top of providing services to China's chemical, petrochemical and industrial park sectors, all of which are heavy water users. The company is in talks with some investors who have expressed interest in buying a stake, a spokeswoman said, adding that Singapore is attractive to the firm because of its status as a financial centre and its ongoing growth as a "global hydrohub". "Water treatment companies have not been on the radar for a while, but now investors are increasingly looking at companies that are undervalued or have yet to realize their potential," says OCBC. In Singapore, shares of United Envirotech have surged more than 170% over the past 12 mths, outperforming the 19% gain in the STI . SIIC Environment, Memstar Technology and HanKore Environment have risen in the range of 33-67%. However, Hyflux shares have underperformed the index in the past year. CIMB said the company's project win rate has to accelerate so its share price can pick up. Its valuation also appears "fairly priced" compared to its major Asian peers. Moya Asia and Sound Global, both of which reported weak quarterly earnings recently, have lagged the index too. Conglomerates SCI and Keppel Corp also have some water-related businesses.