Hankore

Hankore: Hankore's FY13 earnings declined slightly to Rmb99.5m (-3%), despite a 50% jump in revenue to Rmb369.1m. This was mainly due to a higher value of reversal on impairment of intangible assets and financial assets made in FY12, as well as professional fees for capital activities and employee bonuses paid out this year. Otherwise, core earnings would have improved by 199%. As a beneficiary of China's bid to create a sustainable water environment, Hankore's growth in revenue was due to higher construction revenue of Rmb167.5m (+130%) and an increase in recurring water treatment income of Rmb200.5m (+16.2%) which consists of water discharge fees and finance income from service concession arrangements. Consequently, Hankore recorded higher gross profit margin for both construction activities (+5.3 ppts to 14.3%) and recurring water treatment activities (+5.1 ppts to 70.1%). Upon completion of several phases that the group has undertaken, as well as the increasing approvals from the local authorities to charge higher water discharge fees on its projects, Hankore's revenue will be boosted by increased recurring income on higher water treatment capacity and water discharge fees. At $0.052, Hankore trades at 7.7x trailing P/E.