VALUATION
- The company is currently trading at 2.0x FY13 P/B. Tritech reported FY14 revenue of S$55.7m (+9.3% yoy) driven by higher revenue from specialist engineering services as well as its water business. However, the company slipped into a loss of S$8.7m mainly attributable to a S$7.6m fair value loss on convertible bond and increase in administrative expenses due to professional fees related to the preparation work for the proposed spin-off listing of its resource segment.
- Tritech has three main business segments. The specialist engineering service division provides geotechnical services, instrument and design for major customers including JTC Corporation, Land Transport Authority and Public Utilities Board. As at 30 May 14, this segment had an orderbook of S$115.1m.
- The second business segment is in the resource business where the company owns a high-grade marble quarry in Kelantan, Malaysia. After realising the marble was predominantly grade A, the company has proposed to spin off this business segment and eventually list on it on an exchange.
- Its third business segment is in the water-related services such as water treatment, water supply and seawater desalination projects. In 2009, the company ventured into Qingdao, China to construct a membrane production base with five plants. The five plants are able to produce fibre membranes and membrane modules, bottled water and water purifiers, and membrane-related and water monitoring products.
- The company has also announced that they have entered into a non-binding MOU to acquire a 49% stake in Jining Zhongshan Public Utilities Water company. This company has four water supply plants (daily capacity of 300,000m3 ) and one water treatment plant (daily treatment output of 200,000m3).
- While the most recent MOU completes the value-chain of providing one-stop solution for the water-related service industry, the fund raised may carry a high cost for the acquisition. Tritech has proposed to issue S$42m worth of convertible loan with an indicative interest rate of 12% p.a. and the repayment will be via allotment of new shares priced at 10% discount to weighted average share price in the last seven trading days with a minimum price of S$0.200 and maximum price of S$0.280.
- In the longer term, we think that Tritech will benefit from the anti-pollution and environmental protection policies from the Chinese government if they are able to integrate and create synergistic benefits between the different water-related assets.
No comments:
Post a Comment