SIIC Environment

SIIC Environment: DBSV initiates coverage with Buy Call and TP $0.25 The house notes that SIIC is fast becoming one of the largest players in China’s water treatment and supply industry by design capacity. The company is an owner and operator of water supply and wastewater treatment (WWT) facilities. By the end of 2013, SIIC has quadrupled its total water treatment design capacity to 4m tons per day (tpd) from 1m in 2009. SIIC’s current portfolio of 44 projects across twelve provinces in China generates c.64% of total revenue. The balance comes from construction revenue for internal facilities or development of third party water plants. Growth amid rising tide and strong parent support. SIIC is 46.72% owned by Shanghai Industrial Holdings Ltd (SIHL), a state owned enterprise (SOE) which facilitates SIIC’s acquisitions and gives it access to capital at preferential rates, thus enabling the firm to leapfrog rapidly into China’s environmental industry. Apart from growing organically with expansion and upgrading of its existing plants, SIIC will embark on acquisitions given its low net gearing of 0.3x and access to attractive funding rates. Asset injection by parentco is another pontential kicker.