HanKore

HanKore: Acquiring China Everbright's water business for Rmb5,811.3m ($1.2b) or 4.5x P/B via an issue of 1,940.3m shares at $0.703/share or 1.5x P/B, resulting in a reverse takeover of HanKore, transforming the group into one of the largest water treatment companies in China. Post acquisition, the state-owned enterprise will control 78% stake in the enlarged group. Upon completion, the enlarged group will have a total of 32 waste-water treatment plants with a designed capacity of 3.4m tons/day (tpd), 4 reusable water projects with a designed capacity of 62k tpd, 1 waste-water source heat pump project which services an area covering 125k sqm, 2 completed build-transfer projects with a designed capacity of 110k tpd, 56km pipeline network and 10 pump stations with investment scale equivalent to 250k tpd. Proforma FY13 EPS will double to Rmb0.10 ($0.02), while NAV will drop from Rmb2.55 to Rmb1.56 ($0.31). The acquisition will boost the group's competitiveness, which may include: - lower cost of debt funding, enhancing returns on future projects; - increased scale of operations, earnings and assets; - becoming one of the largest water treatment companies in China; - greater ties with the Chinese government The long stop date for the proposed acquisition will be on 12 Dec 2014.