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(22-06-2014, 10:59 AM)CY09 Wrote: There are now 2 Polarising analyst camps in Hankore now.
At one corner, there is Maybank and OSK analyst who are issuing buy calls. Interestingly they are saying a forecast forward P/E of 30x for Hankore isn't expensive. At the other corner, Kay Hian and CIMB analyst who are recommending a sell because 33x forward P/E is too expensive. It is rather interesting. In my view, for a stock to trade at 30x P/E is pricing very optimistic expectations that its earnings will double over 5 years. Let alone to trade at forward P/E of 30x.
Like it or not, earnings is what drives a stock prices over the long run and not because it is the in flavor.
i think PE talk is rather redundant. half of CEW was CEWIL water asset and was doing well, the other half was HK which was lost making and was on its way to turnaround. There is PE to talk about for a loss making company to start with.
just some back of the envelop calc of CEW recurring income potential:
ex-CEIL wwt has total of abt (1.8mt/d * 365days) 650 mln m3/yr of contracted wwt capacty, they said they treated 276 mln m3 of wwt in 1h2014, this was abt 80% utilisation, non-construction revenue was 427 mln RMB. this translate to 1.5rmb/m3 water tariff. this was written somewhere in the 1h2014 report.
HK has 1.5mt/d or 550mln m3/yr of contracted wwt capacity, i struggle to figure out HK utilisation, i reckon that utilisation was bad, otherwise they wont be loss making anyway.. from their 1h2014 income statement (page 11 of the rto circular), non-construction revenue was 100 mln rmb for 6mth, 244mln for whole of 2013. i reckon that their water discharge standard is mostly grade b, so assume 1 rmb/m3 tarriff average. this implied a 40-45% utilisation.
obviously, one half of the company has been performing well with high utilisation high discharge tariff, while the other half is still struggling to turnaround. i can imagine if the new management is able to turn it around, we are talking about a (1.5+1.8mt/day)*0.365*1.5rmb/m3= 1.5 to 2bln rmb per yr of recurring income. which is not difficult to achieve, given the track record of the management team, cheap financing, and most importantly these are already contracted wwt capacity with the various municipal govt, they just have to make good and perform.
view?
