报告名称：SIIC Environment Alert(SIIC.SP)Access China conference highlights 2016
报告类型：海外市场
报告日期：2016-01-13
研究机构：德意志银行
页数：1
简介：Capacity outlook
SIIC secured c.1.5mt/d of water projects in 2015 (mostly wastewater treatmentprojects). Its total designed capacity had reached c.6.94mt/d by end-2015.Management maintains its target of additional capacity of 1-1.5mt/d for 2016.Going forward, more new project wins could come from BOT/TOT projects vs.large-scale acquisitions. Management has also said that it will stick to theproject IRR requirement of c.10% for new project wins.
Potential asset injection and dual listing in HK
According to management, the procedures for dual listing in Hong Kong couldstart as early as this quarter if there is no large acquisition deal. SIIC is alsopushing for asset injection of the 16.8% stake in Longjiang Environment fromits parent SIHL (0363.HK, NR) in 2016. The 45% stake in General Water bySIHL, on the other hand, might not be injected in the near term, owing tovaluation issues. SIHL’s stake in SIIC is now just above 35%, lower than theideal level of above 40% as viewed by SIHL, according to management.
Tariff and gross margin
The average treatment tariff is c.Rmb0.9/t (incl.VAT). As c.60% of SIIC’sprojects are still at the Grand 1B discharge standard, management sees manyplant upgrading opportunities going forward. SIIC does not intend to increaseits gross margin assumption of 12% for the non-cash BOT construction. Aslower-margin construction activity will increase in 2016, the company’saverage gross margin will decline.
Financing
Currently, 70% of its debt is denominated in RMB, with an average interestcost of c.6%. The remainder is mainly foreign debt borrowed from its parent,Shanghai Industrial Holding Limited (SIHL), with an average interest cost ofc.4%. Management expects the overall interest cost to decline in 2016, as theborrowing cost in China has now come down to c.5%. The company views anoptimal net debt to equity ratio of 100%, vs. the current c.40%.

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