Hankore Environment Tech Group (BIOT SP) NOT RATED

Share Price S$0.052

Target Price n.a.

Upside n.a.

Company Description

Hankore Environment Tech?s core business is in

the treatment of wastewater and sludge. As at

31 Mar 13, the group had a total contracted

capacity of 1.57m tons/day for 11 water

treatment projects with an average concession

period of 25-30 years.

GICS sector Utilities

Bloomberg ticker: BIOT SP

Shares issued (m): 4,821.7

Market cap (S$m): 250.7

Market cap (US$m): 196.1

3-mth avg t'over (US$m): 2.8

A New Era

Investment Highlights



management team in May 11, Hankore underwent a major

restructuring and rebounded from a loss of Rmb407m in FY11 to a

profit of Rmb103m in FY12. The group was also awarded one of

China?s top ten new pioneer enterprises in the water industry for 2011

and one of the top ten fastest growing water companies in 2012.

Hankore?s executive chairman, Mr Chen Dawei, is the largest

shareholder with a 16.5% stake at a cost of S$0.04/share.New management, new beginning. With the appointment of a new



principal business is in the operation of waste water treatment plants in

China. In FY12, Hankore derived 70% of its revenue and 94% of its

profit through water tariffs from waste water treatment plants. With a

minimum water tariff guarantee and supply undertake by the local

governments, Hankore enjoys a stable recurring income from its water

treatment plants.Simple business model with a recurring income base. Hankore?s



in 11 water treatment plants with a total capacity of up to 1.57m

tons/day when fully completed. With the S$14.7m proceeds from the

share placement to Mr Wang and S$50m from the recent issuance of

fixed-rate notes, we believe Hankore is looking to acquire more water

plants to grow its bottom line. It reported a 70% jump in net profit for

9MFY13.Growing recurring income. As at 31 Mar 13, Hankore had invested

Our View



and was identified as one of China?s fastest growing water companies.

However, marred by its controversial past, valuation has remained

depressed at 13.1x PE vs its peers? average of 24.5x. We believe the

management?s major stake in the company is a show of confidence in

Hankore. Mr Chen?s cost of investment at S$0.04/share will likely

serve as a price support for the stock.With the new management, Hankore enjoyed an earnings turnaround

Price Chart

Source: Bloomberg

Analyst

Loke Chunying

+65 6590 6637

cyloke@uobkayhian.com

Key Financials

Year to 30 Jun (Rmbm) FY10 FY11 FY12 3Q12 3Q13

Net Turnover 359.7 196.1 245.4 65.6 80.4

EBITDA (60.8) (59.3) 82.6 21.0 46.9

EBIT (110.6) (83.0) 68.6 17.4 42.9

Net Profit 222.1 (407.2) 102.6 8.0 31.8

EPS (cent) 18.86 (22.00) 2.00 0.20 0.80

P/E (x) 1.3 - 13.1 - -

P/B (x) 0.2 0.7 0.7 0.7 0.7

Dividend Yield (%) 0.0 0.0 0.0 - -

Net Margin (%) 61.7 (207.6) 41.8 12.2 39.6

Net Gearing (%) 78.1 31.9 31.8 33.0 31.5

Interest cover (x) (1.6) (2.4) 1.8 - -

ROE (%) 21.7 (30.9) 6.9 - -

Source: Bloomberg, UOB Kay Hian