HKD13546.9m market cap
HK$8.42 last close
China Water Affairs (CWA) is a pioneer in the privatisation of water supply assets in China. It seeks to create growth via volume/price increases and acquisitions. CWA is a constituent of the FTSE Environmental Opportunities Asia Pacific Index.
Investment summary
CWA achieved H1 growth in revenue, net profit, EPS and DPS of 17.9%, 20.3%, 14.9% and 50% respectively. The core business of water supply and environmental protection saw operating profits increase by 19.3%. Increases in water volume sold, tariff hikes, new connections and contribution from new projects all contributed to increased profits. Following the results we made adjustments to our FY19 estimates and we now forecast revenue of HK$8,593m and EPS of HK$0.832. We also increased our DPS forecast to HK$0.30 (HK$0.262) following the large interim increase. We believe the macro operating environment remains favourable for CWA and we see the announced 50% increase in the H1 DPS as an indication of management’s confidence in the future. CWA trades on a modest PEG ratio of c. 0.7x.
Y/E Mar |
Revenue (HK$m) |
EBITDA (HK$m) |
PBT (HK$m) |
EPS (c) |
P/E (x) |
P/CF (x) |
|---|---|---|---|---|---|---|
| 2017A | 5708.0 | 2646.0 | 1963.0 | 55.4 | 15.2 | N/A |
| 2018A | 7580.0 | 3097.0 | 2462.0 | 71.8 | 11.7 | N/A |
| 2019E | 8593.0 | 3644.0 | 2873.0 | 83.2 | 10.1 | N/A |
| 2020E | 10002.0 | 4246.0 | 3415.0 | 98.4 | 8.6 | N/A |
| Last updated on 21/02/2019 | ||||||
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 21/02/2019
Sector |
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| Industrials |
Share price graph
Balance sheet |
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|---|---|
| Forecast net debt (HK$m) | 7978 |
| Forecast gearing ratio (%) | N/A |
Price performance
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12m |
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Key management |
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| Duan Chuan Liang | Chairman |
| Liu Yu Jie | Executive director |
| Ding Bin | Executive director |
| Li Zhong | Executive director |
