SIIC

SIIC: Acquiring a 25.3% stake in Longjiang Environmental Protection Group for CNY405m cash, pricing the asset at a reasonable and normalized 23-27x FY13 P/E. Maybank-KE is positive on the deal on reasonable valuations, plus it allows SIIC to penetrate into the northeast China market. Longjiang engages in wastewater treatment, sludge treatment and tap water supply in the northern region of China, with water supply capacity of 2.2m ton/day and sludge treatment capacity of 1,000 ton/day. The acquisition is in-line with Maybank-KE’s acquisition forecast of 1m ton/day, therefore forecasts remain unchanged at $0.22 (Buy), pegged to 30x FY15E P/E. SIIC is favoured for tis strong governmental connections and lowly-geared balance sheet, which serve as a powerful acquisition tool.