- Placing 120.7m new shares to IFC and RRJ at SGD0.94 each, 9% discount to last closing price.
- Positive on the deal. CEW could receive cheaper debt from IFC to fund future growth.
- Still our sector top pick. Maintain BUY, EPS & SGD1.26 TP for now. Catalysts from capacity expansion.
China Everbright Water (CEW) announced an issue of 120.7m new shares to IFC (49.7m) and RRJ (71m) at SGD0.94 apiece. This represents a 9% discount to its last closing price. The new shares are equivalent to 4.8% of its existing share base. This exercise will cause a small 5% EPS dilution.
Cash-rich, hungry for growth
We view this deal positively. Given its strong balance sheet and low gearing, CEW is not in dire need of capital. But this deal could give it two strategic investors. IFC and RRJ are not new to the company. IFC is an existing lender to CEW. RRJ is active in the water sector and is a minority shareholder of China Everbright International (257 HK) and SIIC. Although the placement price is at a big discount, we think CEW could benefit from potentially cheaper debt from IFC to fund its future growth. CEW remains our top sector pick. After a 12-month M&A lull, it is cash-rich and hungry for good assets. We expect acquisitions this year and have factored in an additional 1m tonnes/day of capacity for FY15E-16E each. Maintain BUY with capacity expansion as key catalysts. Pending
SGX and shareholders’ approval, we keep our EPS and TP.
No comments:
Post a Comment