SIIC Environmen

SIIC Environment: 4Q13 results was broadly in line with estimates, even as net profit slumped 45.3% to Rmb31.3m taking FY13 net profit to Rmb150.1m (+15%). Revenue surged 54.9% to Rmb436.6m, led by a 103% rise in construction revenue to Rmb253.6m and a 25% rise in water treatment and supply revenue to Rmb181.4m, led by further contributions from the Nanfang Group and the completion of certain construction projects during the quarter. Bottom-line was however weighed by a 33% decline in finance income to Rmb51.5m, due to the reassessment of accounting estimates on the recognition of operating income, financial income and repayment of financial receivables. Meanwhile other expenses surged to $6.8m versus $0.3m, attributable to the impairment of goodwill relating to the EPC cash generating unit. Going forward, SIIC aims to strengthen its asset base via organic growth such as subsequent expansion and upgrading works of existing projects and viable M&As. To further diversify its recurring income streams, the group will also exploring other areas of environmental protection such as thermal power generation and air purification. The group guides that the on-going favourable policies by the PRC Government in supporting the growth of water treatment and supply sector would augur well for the group as it rides on these favourable industry dynamics. At current price, SIIC trades at 34.0x FY13 P/E, versus its local peer’s average of 27x.