SIIC Environment Holdings Ltd. – Value Analysis (SINGAPORE:BHK) : December 28, 2017

Capitalcube gives SIIC Environment Holdings Ltd. a score of 38.

Our analysis is based on comparing SIIC Environment Holdings Ltd. with the following peers – CITIC Envirotech Ltd., Hyflux Ltd. and Better World Green Public Co. Ltd. (CEE-SG, 600-SG and BWG-TH).

Investment Outlook

SIIC Environment Holdings Ltd. has a fundamental score of 38 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It trades at a lower Price/Book multiple (0.65) than its peer median (1.11).
  • The market expects BHK-SG to grow more slowly than its peers and for its median ROE to decline.
  • BHK-SG‘s relative asset efficiency and net profit margins are both around the median level.
  • Changes in the company’s annual revenue and earnings are around the median among its peers.
  • Over the last five years, BHK-SG‘s return on assets has declined from about median to less than the median among its peers suggesting that the company’s historical competitiveness in operations is slipping away.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While BHK-SG‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company is likely overinvesting in a business with only median returns.
  • BHK-SG seems too levered to raise additional debt.

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Leverage & Liquidity

BHK-SG would seem to have a hard time raising additional debt.

  • With debt at a relatively high 58.66% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 53.52%), and relatively tight interest coverage level of 1.93x, BHK-SG would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 3 peers for the company have an outstanding debt balance.

BHK-SG has moved to a Limited Flexibility from a relatively high leverage profile at the recent year-end.

  • BHK-SG‘s interest coverage is downward trending and is now similar to its five-year average interest coverage of 1.90x.
  • Though its interest coverage has remained relatively stable at 1.93x compared to 2016, its peer median has increased to 3.98x from 3.10x during this period.
  • Interest coverage fell 1.16 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • BHK-SG‘s debt-EV has declined 1.48 percentage points from last year’s high but remains above its five-year average debt-EV of 40.89.
  • Though its debt-EV decreased to 58.66% from 60.13% (in 2016), its peer median remained relatively stable during this period at 53.52%.
  • Relative to peers, debt-EV fell 1.82 percentage points.

Access the detailed analysis for SIIC Environment Holdings Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
CITIC Envirotech Ltd. 48.39 1.03 6.03 19.7
Hyflux Ltd. 76.44 1.72 -0.18 -6.09
Better World Green Public Co. Ltd. 21.6 1.94 6.44 34.81
SIIC Environment Holdings Ltd. 58.66 0.74 1.93 8.27
Peer Median 53.52 1.38 3.98 13.98
Best In Class 21.6 1.94 6.44 34.81

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Company Profile

SIIC Environment Holdings Ltd. engages in water treatment, solid waste treatment, and other environment-related businesses. It operates through following segments: Construction; Water Treatment and Water Supply; Waste Incineration; and Other. The Construction segment engages in the design, assembly, construction, installation, and commissioning of water supply or waste water treatment systems and plants for industrials and municipals. The Water Treatment and Water Supply segment constructs, manages, and operates infrastructure under service concession arrangements and non-service concession arrangements. The Waste Incineration segment includes construction, management, and operation of waste incineration related infrastructure under service concession arrangements. The Other segment involves design and consultancy on the projects and installation of water meters. The company was founded on November 19, 2002 and is headquartered in Singapore.

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