Background: Leader Environmental Technologies (LeaderEnv) is a Singapore-based investment holding company with a 100% interest in China-based Jilin Anjie Environmental. Anjie provides environmental protection solutions for industrial wastegas and wastewater emissions in China.
Recent development: The company posted an impressive 80.7% YoY increase in 1H11 net profit but 2H11 performance would be more critical as more than 80% of its earnings are made during this period. Share price has dived by 47% since our last write-up in May this year, with no negative developments. On the contrary, the stock was recently named as one of Forbes’ Asia’s 200 Best Under a Billion.
Key ratios…
Price-to-earnings: 3.0x
Price-to-NTA: 0.67x
Dividend per share / yield: S$0.0188 / 3%
Net cash/(debt) per share: S$0.059
Net cash as % of market cap: 45.9%
Share price S$0.128
Issued shares (m) 491.612
Market cap (S$m) 62.9
Free float (%) 40.6%
Recent fundraising activities July 10: IPO – 91m new and 25.5m vendor shares @ S$0.21
Apr 11: Placement – 50m new shares @ S$0.25
Financial YE 31 Dec
Major shareholders Lim Baiyin (42.4%), Venstar Investment (3.8%)
YTD change -41.8%
52-wk price range S$0.120-0.325
Our view
No lack of projects. Management said there is no lack of projects in the market and the company can afford to be selective, choosing better-margin projects with favourable payment terms. It also mentioned that it has made good progress in securing new orders and would make a separate update on its orderbook figure. Its last orderbook update was RMB153.7m in May this year.
Acquiring state-owned power plants. LeaderEnv attempts to smooth its revenue stream by undertaking OOT and O&M contracts for its recurring revenue as opposed to lumpy EPC projects. It is awaiting regulatory approval to acquire four state-owned desulphurization systems, which would help kick-start its OOT business.
Improved balance sheet but negative operating cash flow. While recent placement has improved its balance sheet strength, we note the relatively large negative operating cash flow of RMB69m in 1H11. This was because of the large working capital outlay under unbilled contracts work-in-progress and prepayments to suppliers. LeaderEnv attributed this to an increase in business activities.
Magnitude of sell-down uncalled for. The magnitude of the sell-down is uncalled for, in our opinion. Valuation has turned rather attractive with the stock trading at FY10 PER of only 3.0x, 0.7x book value and net cash making up 46% of market cap. Dividend yield, though not particularly enticing, is quite decent at 3.0%.
No comments:
Post a Comment