China EverBright Water

China EverBright Water: Maybank-KE views the recent placement of 120.7m new shares to International Finance Corporation (IFC) (49.7m shares) and RRJ Capital (71m shares), at $0.94 apiece, positively. Given China Everbrigh Water’s (CEW) strong balance sheet and low gearing, CEW is not in dire need of capital, but the deal gives it access to two strategic investors. IFC and RRJ are not new to the company, with IFC being an existing lender to the group, while RRJ is active in the water sector and is a minority shareholder of China Everbright International (257 HK) and SIIC Environment. Despite the placement price being at a 9.2% discount to the CEW’s last traded price of $1.035, prior to the announcement being made, Maybank-KE opines that CEW could benefit from potentially cheaper debt from IFC to fund its future growth. Overall, CEW (Buy: TP $1.26) remains the house top sector pick. After a 12-month M&A lull, CEW is cash-rich and hungry for good assets. Maybank-KE expects acquisitions to contribute to an additional 1m tons/day of capacity for FY15E-16E each.