- 2Q14 results in line, driven by acquisitions.
- With recent CNY700m share placement and strong balance sheet, SIIC can make more acquisitions to power its growth.
- Maintain BUY and TP of SGD0.20, set at 30x FY15E P/E.
2Q14 net profit increased 19.9% YoY. 1H14 net profit forms 51.6% of our full-year forecast. Growth was led by its acquisition of Shanghai Qingpu (wastewater treatment), Shanghai Pucheng (waste to energy) and Dazhou Jiajing (waste to energy). Revenue jumped 34.8% YoY to CNY381.8m. Water-treatment revenue, a high-quality and recurring income source, grew 19.2% YoY. This was led by higher volume and Shanghai Qingpu. GPM decreased 5.1ppt to 27.4%. No cause for concern as the dip was due to higher contributions from the construction sector, which has a lower margin.
Acquisition-led growth
SIIC’s future growth will depend on more acquisitions, in our view. We believe there are sufficient targets in its pipeline. With its recent CNY700m share placement and strongest balance sheet among peers, it should have sufficient muscle to execute its acquisition plan. Maintain BUY and TP, set at 30x FY15E P/E.
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