Short Term Trading Opportunity? : SIIC Environment (SGX)

Company Background

SIIC Environment Holdings Ltd. (“SIIC Environment”, stock code: BHK.SG, 807.HK) is a top-tier integrated player in China’s water and environmental markets. It is engaged in wastewater treatment, water supply, solid waste management and other environmentrelated businesses. It was previously known as Asia Water Technology Ltd (“Asia Water”) which was listed on the SGX-ST Catalist in 2005. In 2010, Shanghai Industrial Holdings Ltd. (“SIHL”, stock code: 363.HK) acquired a controlling stake and completed debt restructuring in Asia Water. It was renamed SIIC Environment and transferred to the SGXST Mainboard in 2012. Since the restructuring, SIIC Environment has shown tremendous growth and continues to increase its market share in China’s water and environmental sector.

SIIC Environment is an active investor and operator of environment-related assets and has been operating in China’s water sector for over a decade. Currently, it boasts an overall portfolio of about 200 water treatment and supply projects, 7 waste incineration projects and 10 sludge disposal projects across 19 municipalities and provinces in China, namely Shandong, Guangdong, Hubei, Hunan, Jiangsu, Shanghai, Zhejiang, Jiangxi, Anhui, Fujian, Guangxi, Ningxia, Henan, Liaoning, Inner Mongolia, Shanxi, Sichuan, Jilin and Heilongjiang.

Leveraging on its scalability and competencies, SIIC Environment will continue to expand its business and explore new markets such as industrial wastewater treatment, seawater desalination, sludge treatment and handling, soil treatment, renewable energy, water technology and pollution control, thereby strengthening its top-tier position in China’s water and environmental industry. Source: https://www.siicenv.com/en/about-us/corporate-profile/

Directional Assumption

Long (short term opportunistic trade)

Finding The Narrative

Purely from a technical perspective. Anticipating break from its long downtrend, coupled with increasing volume.

There was some good news about this company – https://www.straitstimes.com/business/companies-markets/siic-environment-bags-wastewater-treatment-plant-project

Nevertheless, the following cashflow statement tells me that I wouldn’t want to hold this as a long term investment. Negative freecashflow on a y-o-y basis.

Trading Strategy

Possible target price = 0.205 / 0.220 / 0.235

Possible cut loss = 0.17

Downside Risks

Not very sure about a negative y-o-y freecashflow business. Further, it is a high capex business.

Regulatory / government-influenced type of concession business since it deals with water treatment. Not sure about the operating / regulatory environment in this space in China.

Some recent changes in top management. Not too sure about the story behind this – https://www.businesstimes.com.sg/companies-markets/siic-environment-changes-ceo-on-re-designation-of-work-at-the-top

In summary, I will only consider this as a possible short term trading opportunity.

Disclaimer: This post is not an investment / trading advice or endorsement. Please refer to the General Disclaimer of this blog. If in doubt – please consult with a licensed financial planner or adviser.

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