CITIC Envirotech Ltd. – Value Analysis (SINGAPORE:CEE) : December 29, 2017

Capitalcube gives CITIC Envirotech Ltd. a score of 69.

Our analysis is based on comparing CITIC Envirotech Ltd. with the following peers – CSC Holdings Limited, Tritech Group Limited, Boustead Singapore Limited and Hai Leck Holdings Limited (C06-SG, 5G9-SG, F9D-SG and BLH-SG).

Investment Outlook

CITIC Envirotech Ltd. has a fundamental score of 69 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It currently trades at a Price/Book ratio of (1.58).
  • CEE-SG‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • CEE-SG‘s relatively high profit margins are burdened by relative asset inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • CEE-SG‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While CEE-SG‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company is likely overinvesting in a business with only median returns.
  • CEE-SG might have enough interest coverage to take-on additional debt prudently.

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Leverage & Liquidity

CEE-SG might have enough interest coverage to take-on additional debt.

  • While CEE-SG‘s debt to enterprise ratio of 48.39% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 40.44%), it also enjoys a relatively high interest coverage level of 6.03x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 4 peers for the company have an outstanding debt balance.

CEE-SG has maintained its Some Capacity profile from the recent year-end.

  • CEE-SG‘s interest coverage is its highest relative to the last five years and compares to a low of 2.33x in 2014.
  • The increase in its interest coverage to 6.03x from 3.99x (in 2016) was also accompanied by an increase in its peer median during this period to 6.03x from 3.99x.
  • CEE-SG‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 46.71%.
  • Like the interest coverage trend, the increase in its debt-EV (to 48.39% from 46.23%) was also accompanied by an increase in its peer median during this period (to 40.44% from 38.28%).

Access the detailed analysis for CITIC Envirotech Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
CSC Holdings Limited 56.85 1.06 -3.25 12.35
Tritech Group Limited 40.44 1.13 -0.6 -16.95
Boustead Singapore Limited 22.3 2.28 23.41 78
Hai Leck Holdings Limited 0.29 3.09 1242.18 10597.6
CITIC Envirotech Ltd. 48.39 1.03 6.03 19.7
Peer Median 40.44 1.13 6.03 19.7
Best In Class 0.29 3.09 1242.18 10597.6

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Company Profile

CITIC Envirotech Ltd. is a holding company, which engages in the provision water and wastewater treatment, water supply and recycling. It operates through the following segments: Engineering, Treatment, and Membrane. The Engineering segment designs and implements integrated environmental engineering solutions based on membrane technology. The Treatment segment renders waste water treatment services. The Membrane segment manufactures and sells polymers. The company was founded by Yu Cheng Lin on July 9, 2003 and is headquartered in Singapore.

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