Hankore

Hankore: In what could be a sign of heightened interests by institutional investors in the counter, latest filings from Bloomberg reveal that global funds Invesco, State Street Corp and ETF Powershares Nasdaq OMX Global Water Fund have accumulated stakes in Hankore, with 106.7m, 2.1m and 3.1m shares bought respectively on 4th Feb’14. Incidentally, this comes just after two local broking houses recently initiated coverage on Hankore, with both citing the ongoing reverse takeover (RTO) deal of China Everbright International’s (CEI) water facilities as a “game changer” for the group. CEI is the largest China-focused environmental management specialist, based on market cap. Its move to spin-off its water assets into HanKore lend a strong vote of confidence in the latter. CEI has an utilised wastewater treatment capacity of ~1.3m tpd in 1H13, more than double Hankore’s current operating capacity of ~0.6m tpd. Post-acquisition, Hankore’s net assets and annualized sales could triple to an estimated Rmb5.4b and Rmb1.6b, respectively. As a larger entity, Hankore would be a more attractive candidate for increased analyst coverage and institutional fund participation – both key ingredients for a share price re-rating. Given the heightened interests in the PRC’s water sector, we would not be surprised if Hankore continues to receive further appreciation amongst institutional investors and analysts.