SIIC Environment

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Listed on the SGX-ST Catalist in 2005 and subsequently transferred to the SGX-ST Mainboard in 2012, SIIC Environment Holdings Ltd., a top-tier integrated player in the China's environmental investment industry, is committed to enlarging its market share in the water and environmental protection sector. In 2010, Shanghai Industrial Holdings Limited invested, restructured and gained control of the Group.

SIIC Environment is an active investor and operator of environmental related assets and has been operating in China’s environmental protection sector for more than a decade. Currently, the Group boasts an overall portfolio of about 70 water treatment and supply projects and 3 waste-to-power projects across 15 municipality and provinces, namely Shandong, Guangdong, Hubei, Hunan, Jiangsu, Shanghai, Zhejiang, Fujian, Guangxi, Ningxia, Henan, Liaoning, Shanxi, Sichuan and Heilongjiang. 

Leveraging on the scalability of its capability, SIIC Environment has expanded its competencies to include related sectors in the water and environmental protection industries such as industrial wastewater treatment, seawater desalination, waste-to-power and new energy resources, thereby strengthening its position in China’s environmental investment industry.

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As at 31 December 2015, SIIC Environment is in Top 10 securities holdings of Value Partners Classic Fund. It constitutes about 4.1% of the fund.

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Proposed Dual Primary Listing on the SEHK

1. Receipt of Approval-In-Principle
2. Appointment of Hong Kong Joint Company Secretary, Appointment of Hong Kong Share Registrar and Principal Place of Business in Hong Kong

More details in http://infopub.sgx.com/FileOpen/SIIC%20-...eID=492256

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SIIC Environment Awarded Government Approvals on Two Wastewater Treatment Plant Projects

SIIC Environment Holdings Ltd. today announced that it has been awarded government approvals on commercial operation of two wastewater treatment projects in the People’s Republic of China.

Details of the two projects are as follows:
1. The Group, through its subsidiary, SIIC Environment (Dalian) Co., Ltd., has obtained the government approval on commencing commercial operation of the Dalian Puwan New District Sanshilipu Wastewater Treatment Plant Project ( 大连普湾新区三十里堡项目, the "Dalian Project") in the Liaoning Province, effective from 21 January 2019. The Dalian Project has a total design capacity of 20,000 tons/day, with the discharge standard as Grade 1A and the water tariff is priced at RMB1.92/m3.

2. The Ningbo Hangzhouwan New District Wastewater Treatment Plant Project (宁波杭州湾新区污水处理项目, the "Hangzhouwan Project") in the Zhejiang Province has received the government approval on commencing commercial operation effective from 1 January 2019. The Hangzhouwan Project has a total design capacity of 90,000 tons/day and discharge standard is classified as Class IV with a tier water tariff pricing model as below:
* Treated wastewater less than 60,000 tons/day, water tariff priced at RMB1.834/m3.
* Treated wastewater between 60,000 tons and 75,000 tons/day, water tariff priced at RMB1.62/m3.
* Treated wastewater above 75,000 tons/day, water tariff priced at RMB1.584/m3.

Both projects are expected to contribute to the Group’s performance positively going forward.

[CY09]

https://links.sgx.com/FileOpen/SIIC%20-%...eID=677766

SIIC posted a YoY increase of 18% profits attributable to shareholders.

What is more interesting is that this is the first time the company is issuing an interim dividend on top of a final dividend. If it maintains a 1.5 cents dividend annually, re-rating may be expected .

[Shiyi]

https://links.sgx.com/FileOpen/SIIC%20-%...eID=677766

SIIC posted a YoY increase of 18% profits attributable to shareholders.

What is more interesting is that this is the first time the company is issuing an interim dividend on top of a final dividend. If it maintains a 1.5 cents dividend annually, re-rating may be expected .

The gearing of this company is a cause for concern.

[CY09]

That's how the BOT industry of local listed companies seems to be doing business, they have to be heavily levered when constructing a plant, China Ever bright is another example

Their cashflow is another point of contention I have; till now, I notice the few BOTs are always cash flow negative. They just keep growing and recognizing future service concessions as their profits. I am waiting for the day when a BOT stops constructing new plants to see their cashflow.

[Shiyi]

That's how the BOT industry of local listed companies seems to be doing business, they have to be heavily levered when constructing a plant, China Ever bright is another example

Their cashflow is another point of contention I have; till now, I notice the few BOTs are always cash flow negative. They just keep growing and recognizing future service concessions as their profits. I am waiting for the day when a BOT stops constructing new plants to see their cashflow.

Hyflux case is illustrative.

[weijian]

Well, it is a tad too broad to brush off all BOT utility companies, just because there was a very high profile case of Hyflux been in the same industry/similar biz model. And yes, we know that these businesses are in a "heads I dont win, tails I lose" business. The most recent example been Sembcorp Industries having to write off its coal fired power project recently.

There are good and bad assets. And there are good and bad prices. The usual saying "There may be a bargain for a bad asset at a good price". This is the basis of counterintuitive thinking in the value investing discipline. Of course, nowadays "ecosystem" or "recurring income" are hot buzz words and I can't deny that I have fallen in love with those words as well.

Timeframe also needs to be put into context as well. My fellow Moderator CY09 looks to be in the practice of looking for turnarounds, and where is the best place to look for turnarounds other than starting from unloved assets?

[ghchua]

Well, it is a tad too broad to brush off all BOT utility companies, just because there was a very high profile case of Hyflux been in the same industry/similar biz model. And yes, we know that these businesses are in a "heads I dont win, tails I lose" business. The most recent example been Sembcorp Industries having to write off its coal fired power project recently.

In investing, we have to decide whether we would like to take on risk. If yes, then whether there is a margin of safety. In those days, Hyflux is trading at way above book value. Obviously, investors are buying into the growth prospects of the company, and not too concerned about balance sheet issues. I remembered during those days, it is "normal" for water stocks to trade at double digit PEs with little or no yield.

Fast forward to today, we have China Everbright (0.3x book thereabouts) and SIIC Environment (0.2x book thereabouts). Both stocks are yielding 7%+pa (assuming SIIC Environment maintain a final dividend of 1c per share). Both are backed by China government related entities, China Everbright by central government while SIIC Environment is regional one. Yes, we know the risk of these water stocks as pointed out by Shiyi and CY09 here, but a more relevant question would be - Does their current valuation factored in all these risks with a margin of safety? If your answer is yes, are you comfortable with taking on those risks, in exchange for the margin of safety?

Of course, nowadays "ecosystem" or "recurring income" are hot buzz words and I can't deny that I have fallen in love with those words as well.

Then my question back to you is - Are you willing to pay for a "ecosystem" that is still making losses? Are you willing to pay for "recurring income", but comes with frequent rights issues, and also trading at above book value?