SIIC Environment

SIIC Environment: The water treatment and environmental protection company makes its foray into Shanghai's waste-to-energy sector with a 50% stake acquisition in Shanghai Pucheng Thermal Power Energy (SPT) for Rmb530m, to be fulfilled by the group's internal cash resources. The purchase price was at a 12% discount to an independent valuer's estimate of between Rmb601.1m and Rmb650m for the equity stake. SPT currently has a 30-year incineration service contract in Pudong, Shanghai, and boasts a design capacity of 1,050 tons/day of waste processing and able to generate up to 17MW of electricity annually. The acquisition will double the group's current waste processing design capacity to 2,000 tons/day. China's waste-to-energy industry is entering a golden period, accumulating a total investment of Rmb17b in 2012 and set to reach Rmb50b over the next five years. As a fully integrated environmental player, SIIC is poised to benefit from the clear government directives on the development of the waste incineration sector in China. At $0.131, SIIC trades at a hefty 19.3x trailing P/E compared to wastewater treatment peer Hankore's 11.4x.