China Water

China Water: Deutsche initiating coverage on the SGX listed china water players, with Buy calls on both China Everbright Water (TP: $1.32) and SIIC Env (TP: $0.28)

Newly-announced Water Pollution Control Plan and the unprecedented government focus on environmental protection reaffirm our positive view on the water industry. Large-cap SOE stocks have been traded strongly, the house now see more upside for smaller SOE players, as they have a higher growth rate, more potential to surprise and beat market expectations, and more attractive valuation,

For CEW, Deutsche highlights that it is well positioned to become one of the leading water companies in China, supported by its SOE background, low funding cost and synergy with its parent CEI. Expect CEW to accelerate expansion and highlights that the group offers the highest earnings growth and therefore deserves a higher valuation multiple than peers.

For SIIC, the company has the potential to become one of the leading water companies in China due to its SOE background and low funding costs. SIIC is under-researched, with its valuation at a discount to that of its peers. This is likely to change with a potential dual listing in Hong Kong. A potential asset injection could also be a positive catalyst.