China Water Affairs Group

HK: 855

HKD10650.8m market cap

HK$6.64 last close

China Water Affairs (CWA) is a pioneer in the privatisation of water supply assets in China. The company seeks to create growth via volume/price increases.

Investment summary

China Water Affairs Group’s FY19 results revealed revenue below our expectations, offset by higher than expected margins in the water supply business and a lower tax charge (23% – assumed 28%), which allowed EPS to exceed our forecast (+17.2% to 85.1c – forecast for FY19 of 83.2c). Excluding currency fluctuations, y-o-y net profit growth was 25.4%. CWA’s 2013–19 compound annual growth rate (CAGR) in EPS now stands at over 27%. The DPS of 28c (+21.7% y-o-y) undershot our forecast of 30c (2013–19 CAGR of 33%). Net debt increased to HK$10.3bn with a total liabilities/total assets ratio of 64%. The share price has been affected by local market weakness and concerns about the integration of Kangda International, however CWA continues to expand and the rating remains modest.

Y/E Mar
Revenue (HK$m)
PBT (HK$m)
EPS (c)
P/E (x)
P/CF (x)
2018A 7580.0 3097.0 2462.0 71.8 9.2 N/A
2019A 8302.0 3507.0 2772.0 85.1 7.8 N/A
2020E 8757.0 3899.0 3169.0 98.2 6.8 N/A
2021E 9894.0 4473.0 3402.0 105.6 6.3 N/A
Industry outlook

Water supply in China remains fragmented. The central government encourages local governments to deleverage their own balance sheets with private–public partnerships. This trend remains positive for CWA.

Last updated on 20/01/2020
Share price graph
Balance sheet
Forecast net debt (HK$m) 13170
Forecast gearing ratio (%) N/A
Price performance
Actual 11.8 9.2 (19.6)
Relative* 8.2 1.3 (24.4)
52-week high/low HK$8.7/HK$5.6
*% relative to local index
Key management
Duan Chuan Liang Chairman
Liu Yu Jie Executive director
Ding Bin Executive director
Li Zhong Executive director