Sembcorp Industries (SCI) announced last week that it will expand its water business in China’s Liaoning Province with two new wastewater treatment projects in industrial parks in Panjin City. We see the initial phases of these projects as incremental expansions in China, adding about 10% to the group’s total industrial water capacity in the country. The group’s utilities business in China has seen good growth over the years, with net profit increasing from S$6m in 2009 to a forecasted S$50m this year. With the expertise to provide utilities like energy, water and wastewater treatment which will be in demand due to China’s growth, we are optimistic on the long-term prospects of China as a key market for the group. Moreover, SCI has expertise on sustainable living with a focus on environmental protection, which should be in demand in China due to the country’s environmental problems. Maintain BUY with S$6.48 fair value estimate.
Announces two wastewater projects in China’s Liaoning Province
Sembcorp Industries (SCI) announced last week that it will expand its water business with two new wastewater treatment projects in industrial parks in Panjin City. We see the initial phases of these projects as incremental expansions in China, adding about 10% to the group’s total industrial water capacity in the country where SCI has about 298,000m3/day of industrial water capacity, and 1,030,000m3/day of municipal water capacity.
1st phase of first project to add 10,000m3/day capacity
The first would involve a JV agreement to build, own and operate a new RMB117.3m (~S$24.3m) industrial wastewater treatment plant to serve industrial customers in Panjin Fine Chemical Industrial Park (PFCIP). SCI will hold 95% share in the JV.
2nd project’s initial capacity about 22,000m3/day
For the second project, SCI plans to develop an industrial wastewater treatment plant in the West of Panjin Liaodong Bay New District. The plant will be capable of treating highly concentrated industrial wastewater, and is expected to cost around RMB185m (~S$38.4m). Management believes that the industrial park in which this plant is located has strong growth potential.
Growing utilities business in China
The group’s utilities business in China has seen good growth over the years, with net profit increasing from S$6m in 2009 to S$30m in 2012. We are expecting net profit of about S$50m this year; 1H13 net profit has already reached S$32.7m.
Long track record in the country; bright long-term prospects
SCI has a long track record in China, having invested there for about 20 years
and with a presence spanning 15 provinces. With the expertise to provide utilities which will be in demand due to China’s growth, we are optimistic on the long-term prospects of China as a key market. Moreover, SCI has expertise on sustainable living with a focus on environmental protection, which should be in demand in China due to the country’s environmental problems. Meanwhile, both plants are targeted for completion in 1Q15, and have no impact on our FY13-14 earnings forecasts. Maintain BUY with S$6.48 fair value estimate.
Sembcorp Industries (SCI) announced last week that it will expand its water business with two new wastewater treatment projects in industrial parks in Panjin City. We see the initial phases of these projects as incremental expansions in China, adding about 10% to the group’s total industrial water capacity in the country where SCI has about 298,000m3/day of industrial water capacity, and 1,030,000m3/day of municipal water capacity.
1st phase of first project to add 10,000m3/day capacity
The first would involve a JV agreement to build, own and operate a new RMB117.3m (~S$24.3m) industrial wastewater treatment plant to serve industrial customers in Panjin Fine Chemical Industrial Park (PFCIP). SCI will hold 95% share in the JV.
2nd project’s initial capacity about 22,000m3/day
For the second project, SCI plans to develop an industrial wastewater treatment plant in the West of Panjin Liaodong Bay New District. The plant will be capable of treating highly concentrated industrial wastewater, and is expected to cost around RMB185m (~S$38.4m). Management believes that the industrial park in which this plant is located has strong growth potential.
Growing utilities business in China
The group’s utilities business in China has seen good growth over the years, with net profit increasing from S$6m in 2009 to S$30m in 2012. We are expecting net profit of about S$50m this year; 1H13 net profit has already reached S$32.7m.
Long track record in the country; bright long-term prospects
SCI has a long track record in China, having invested there for about 20 years
and with a presence spanning 15 provinces. With the expertise to provide utilities which will be in demand due to China’s growth, we are optimistic on the long-term prospects of China as a key market. Moreover, SCI has expertise on sustainable living with a focus on environmental protection, which should be in demand in China due to the country’s environmental problems. Meanwhile, both plants are targeted for completion in 1Q15, and have no impact on our FY13-14 earnings forecasts. Maintain BUY with S$6.48 fair value estimate.
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