Hankore

Hankore: UOB Kay Hian INITIATES coverage with a Buy call and $0.137 TP, although note that Due to a lack of details, the house have not factored in the potential asset injection by China Everbright Water Investments (CEWI), although both companies had signed a definitive agreement in Dec 13. Under the 12th Five-Year Plan (2011-15), China will increase its wastewater treatment (WWT) capacity target from 125m tons/day in 2010 to 208m tons/day by 2015. However, data from the Ministry of Housing and Urban-Rural Development show that as at 1H13, the country had added only 20.5m tons/day of new WWT capacity to 145.5m tons/day. To achieve the above target, the government will have to roll out massive BOT projects in the next 2.5 years. Hankore has signed a framework agreement with CEI to acquire all the environmental water investments of CEWI and China Everbright International (CEI) via an allotment and issue of new shares to CEI. Hankore has advised there is no certainty or assurance that the proposed acquisition will proceed and has not provided the details and valuation of assets to be acquired. As at 1H13, CEI’s environmental water segment had a reported net book value of HK$3.36b. If CEI injects these assets into Hankore, the company will issue 7.8b new shares to CEI, resulting in CEI owning 63.0% of Hankore. This will boost Hankore’s assets to 30 operational WWT projects and 4 reusable water projects, up from the current 11 assets.