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Services - Infrastructure│Singapore│March 21, 2017

Company Note │ Alpha series

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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China Jinjiang A hidden jewel in China’s waste treatment industry

CJE is the largest WTE operator in China but seems overlooked by investors. ■ A beneficiary of the government’s push for waste incineration. ■ 3-year EPS growth of 13.5% and dividend yield of 6.8% but only 7.3x FY17F P/E. ■ We initiate coverage with an Add rating and DCF-based target price of S$1.10. ■ Strong earnings growth and ongoing expansion of the WTE portfolio are catalysts. ■

An overlooked waste-to-energy (WTE) leader in China China Jinjiang (CJE) is a leading WTE operator in China but not so well-known to the investing community due to its short listing history. CJE is trading at FY17F P/E of 7.3x, at 43% discount to the environmental peers listed in Singapore and Hong Kong. We think this is unjustified given CJE’s longer operating history (over 18 years), large operating capacity (27.4k tpd (tonnes/day)) and projects for development (20.1k tpd).

Well-positioned to capture China’s WTE boom NDRC targets to raise China’s incineration capacity by 36% CAGR from end-2015 to end-2020. We believe there will be plenty of new investment opportunities available in the market. We think CJE can seize these opportunities given its extensive network, good track record and well-established technology in Circulating Fluidised Bed (CFB). Our FY16-19 capacity CAGR forecast of 20% is a conservative estimate, in our view.

More “realistic” earnings as many projects are in BOO format With 84% of the portfolio in BOO (Build-Operate-Own) concession format, CJE recognises most of its earnings under conventional accounting method and does not include much construction earnings, which are pre-operational earnings made by the BOT (Build-Operate-Transfer) accounting treatment adopted by peers. BOT construction accounts for 5% of CJE’s gross profit in FY17F and 4% in FY18F.

WTE net profit expected to grow at 29.4% CAGR (FY16-19F) We forecast CJE’s net profit to grow at 13.5% from FY16 to FY19F driven by the WTE capacity expansion. Excluding the BOT construction earnings and non-core businesses, we expect the earnings from WTE to grow at a robust CAGR (FY16 to FY19F) of 29.4%.

Competitive edge over CEI and Canvest As compared to CEI and Canvest, the two major listed peers, CJE possesses a long history, a geographically diversified WTE portfolio and leading technology in CFB. The low investment costs for CFB (at 10-30% discount to the moving grate technology used by peers) allows CJE to capture opportunities in cities that are cost-sensitive.

Balance sheet may be stretched in 2018F We estimate CJE will have high capex of Rmb6.7bn for FY17-19F in order to complete the projects on hand. We believe this will lift the net gearing to the peak of 102% by end-2018F. This may increase the risk for fund raising, especially in 2018F, in our opinion.

Low valuation and high dividend yield; initiate with Add rating CJE is trading at 7.3x FY17F P/E and 9.1x FY17F EV/EBITDA, the low end of the sector range. Its 3-year EPS CAGR (FY16 to FY19F) of 13.5% and 6.8% dividend yield for FY17F are not fully factored into the share price, in our view. We initiate coverage with Add rating and DCF-based target price of S$1.10. We expect that CJE’s strong earnings prospects and on-going expansion in WTE will trigger a re-rating. Key risks are the construction risk related to new projects and changes of electricity tariffs.

▎Singapore

ADD Consensus ratings*: Buy 1 Hold 0 Sell 0

Current price: S$0.85

Target price: S$1.10

Previous target: S$

Up/downside: 30.2%

CIMB / Consensus: 2.8%

Reuters: CJEH.SI

Bloomberg: CJE SP

Market cap: US$735.5m

S$1,028m

Average daily turnover: US$0.02m

S$0.02m

Current shares o/s: 1,217m

Free float: 38.4% *Source: Bloomberg

Key changes in this note

Not applicable.

Source: Bloomberg

Price performance 1M 3M 12M

Absolute (%) 5.6 -4

Relative (%) 3.5 -12.9

Major shareholders % held China Green Energy 39.0

Win Charm 22.7

Analyst(s)

Keith LI

T (852) 2532 1110 E [email protected]

SOURCE: COMPANY DATA, CIMB FORECASTS

Financial Summary Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F

Revenue (Rmbm) 1,936 2,632 2,590 3,094 3,033

Operating EBITDA (Rmbm) 698 881 927 1,134 1,220

Net Profit (Rmbm) 443.7 597.6 696.2 785.1 872.7

Normalised EPS (Rmb) 0.36 0.49 0.57 0.65 0.72

Normalised EPS Growth 34.9% 34.7% 16.5% 12.8% 11.2%

FD Normalised P/E (x) 11.45 8.50 7.30 6.47 5.82

DPS (Rmb) 0.00 0.25 0.29 0.19 0.22

Dividend Yield 0.00% 5.88% 6.85% 4.64% 5.15%

EV/EBITDA (x) 10.29 7.97 9.09 9.51 8.60

P/FCFE (x) NA NA NA 16.44 12.10

Net Gearing 56% 40% 64% 102% 86%

P/BV (x) 1.53 1.15 1.05 0.97 0.86

ROE 14.5% 15.5% 15.1% 15.6% 15.7%

% Change In Normalised EPS Estimates

Normalised EPS/consensus EPS (x) 0.97 0.99

73.0

84.7

96.3

108.0

0.700

0.800

0.900

1.000

Price Close Relative to FSSTI (RHS)

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Aug-16 Sep-16 Nov-16 Jan-17

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Services - Infrastructure│Singapore│China Jinjiang│March 21, 2017

2

A hidden jewel in China’s waste treatment industry

China’s WTE boom will offer plenty of opportunities

Waste treatment capacity targeted to increase by 46% in the Thirteenth Five Year Plan

The National Development and Reform Commission (NDRC) recently issued the Thirteenth Five Year Plan for Urban Waste Treatment, which contains aggressive targets to be accomplished by end-2020. Despite the substantial growth in the Twelfth Five Year Period, the government will continue to push for waste treatment in the next five years due to urbanisation and in the pursuit of a better living environment. The total capacity of waste treatment is targeted to increase by 46% (or 346,600 tons/day) over the five years. By end-2020, all major cities are targeted to have 95-100% waste treatment whereas counties and towns are targeted to have 70-80%. Total investment over the five years is estimated to reach Rmb252bn, including Rmb170bn for the construction of new waste treatment facilities, Rmb26bn for waste transportation facilities, Rmb24bn for upgrading existing facilities and Rmb18bn for kitchen waste treatment facilities.

Figure 1: Key targets set in the Thirteenth Five Year Plan for urban waste treatment

SOURCES: CIMB, NDRC

Focusing on incineration

In the Thirteenth Five Year Plan, NDRC places all the emphasis on incineration. This is different from the previous five year plan, in which both landfill and incineration were focused on. We believe that this is due to the shortage of proper land in city areas and the secondary contamination of underground water in landfill.

In our view, incineration is a better solution because it can 1) effectively reduce the harm and the size of waste (with proper controls on pollutant emission), and 2) produce clean energy. NDRC targets to reduce landfill capacity by 4.9% but raise the incineration capacity by 151% (or 356,200 tons/day) over the five years. We expect this to create plenty of investment opportunities for waste-to-energy operators.

CJE has a WTE portfolio with extensive geographical coverage – its operating and pipeline projects are located in 16 provinces. Together with its long history and recognition in the WTE industry and good connections with local governments, we believe that CJE will be able to get a decent share of the new investments in the next five years.

(1) For provincial cities, capital cities of provinces and cities with independent planning status (Dalian,

Qingdao, Ningbo, Xiamen and Shenzhen), waste treatement rate is targeted to reach 100% by end-2020.

The target for other cities is over 95%, counties is over 80%, and towns is over 70%.

(2) By end-2020, landfill waste treatmetn will not be used in provincial cities, capital cities of provinces, and

cities with independent planning status.

(3) Provincial cities, capital cities of provinces and cities with independent planning status are targeted to

have over 35% of waste being recycled by end-2020.

(4) Urban waste treatment capacity is targeted to increase from 758,000 tons/day at end-2015 to

1.14m tons/day by end-2020 (or a 7.8% CAGR). Over the five years, the capacity of landfill is targeted

to decrease by 5% whereas that for incineration is targeted to jump 151% (or a 20% CAGR).

(5) By end-2020, incineration is targeted to account for over 50% of the total waste treatment capacity, of

which eastern region has a higher target of 60%.

(6) The construction of incineration plants with capacity of less than 300 tons/day will not be encouraged

by the government.

(7) Waste collection and transportation capacity is targeted to increase by 442,200 tons/day over the five

years.


3

Figure 2: The 2020 capacity of waste treatment facilities targeted by NDRC

SOURCES: CIMB, NDRC

Figure 3: Incineration capacity additions over the Thirteenth Five Year Period targeted by NDRC

SOURCES: CIMB, NDRC

Figure 4: Changes in landfill capacity over the Thirteenth Five Year Period targeted by NDRC

SOURCES: CIMB, NDRC

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Please fill in the values above to have them entered in your report

0

200

400

600

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1,000

1,200

2010 2015 2020F

('000 tons/day)

Landfill Incineration Others

+162%

+151%

+42%

-5%

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-

10

20

30

40

50

60

70

('000 tons/day)

Provinces in which CJE has operating

projects or projects in the pipeline

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(20)

(15)

(10)

(5)

-

5

10

('000 tons/day)


4

CJE is well-positioned to capture the growth opportunities in WTE industry

CJE has the largest WTE capacity …

CJE is well-known in the waste treatment industry but may not be so in the investing community, in our view. It is a leading WTE operator in China in terms of operating capacity. According to research from Frost & Sullivan, which was based on 2014 data, CJE was the largest with operating capacity of 20,530 tons/day at end-2014, followed by China Everbright International’s 14,550 tons/day. Based on companies’ latest data, at end-2016, CJE’s operating capacity reached 25,480 tons/day whereas China Everbright International reached 22,900 tons/day. We estimate that today, CJE is still one of the top WTE operators in China.

Figure 5: Market share (in terms of capacity) of top ten WTE operators at end-2014

SOURCES: CIMB, FROST & SULLIVAN, MEP

… long history, market recognition and technology

CJE has a long history in the WTE industry even though it has a short listing history and may not be as well-known among the investing community as its major rival, China Everbright International. CJE is industry leader in terms of operating scales, history, industry recognition and technology.

Long history and market recognition

Established in 1998, CJE has over 18 years of experience in waste treatment. It started waste treatment businesses even earlier than CEI (a well-known waste treatment company backed by the government), which constructed the first WTE plant in 2005. CJE is a leading enterprise in China’s waste treatment industry and obtained top positions in various industry rankings.

Technological knowhow

CJE adopts Circulating Fluidised Bed (CFB) technology in most of its waste treatment facilities. Most of the waste treatment plants in the market adopt moving grate technology, which is easier to handle but requires higher investment cost. Both technologies have their own advantages and disadvantages depending on local operating conditions.

CJE is a pioneer in Circulating Fluidised Bed technology with well-established expertise. It has a research team of 40 members with an average 10 years of experience in WTE technologies. The company also has a long history of technological support from the professors and experts in Zhejiang University and close co-operation with Nantong Wanda Boiler Co, an equipment manufacturer.

In recent years, CJE has been implementing complex pre-treatment processes to remove non-ferrous metals and other non-inflammable materials. A good pre-

Title:

Source:


China Jinjiang11%

China Everbright International

8%

China National Environmental Protection

7%

Chongqing Sanfeng5%

Weiming4%

Shenzhen Energy4%

Shanghai Municipal Investment

4%Wangneng

3%

Dynagreen3%

Grandblue Environment

3%

Others48%


5

treatment system can (1) increase the calorific value of the waste put into incineration, (2) increase the facilities’ actual waste treatment capacity, (3) reduce the emission of pollutants, and (4) maximise the waste that can be used for recycling.

An extensive geographical coverage

CJE currently has WTE projects in 16 provinces. Its extensive geographical coverage encompasses the eastern, central, northern and northeastern regions. CJE has already established good relationships with municipal governments. With a proven track record in existing projects, we believe CJE has the capability of winning more WTE projects in existing cities as well as in nearby cities in future.

Figure 6: Geographical location of CJE's WTE projects

SOURCES: CIMB, COMPANY REPORTS

Capacity growth will pick up

We expect CJE to speed up its capacity growth from 11.4% CAGR in 2013-2016 to 20.1% in 2016-2019F. This expansion is secured by the new projects that it has won.

Currently, CJE has one project (Gaomi Lilangmingde: 800tpd) undergoing trial run and another two projects (Hothot New Energy and Qitaihi Green Energy: total 2,000tpd) scheduled to be completed in 2Q17F. In addition, CJE has secured sixteen WTE projects with total capacity of 17,260tpd. Among these sixteen projects, three (4,000tpd) are scheduled to start trial operations by end-2017F. CJE will progressively roll out the remaining thirteen pipeline projects. Due to the government’s push for waste incineration, we believe that CJE will continue to secure more projects and keep increasing capacity even after 2019F.


6

Figure 7: CJE's WTE capacity


Less BOT-induced earnings inflation

84% of capacity is in BOO format

Most of CJE’s WTE projects are under BOO contracts. At end-FY16, it had only four projects with aggregate capacity of 3,850 tons/day being under BOT contracts, representing 14% of its total operating capacity. Currently, CJE has nineteen WTE projects under construction or in preparation stage. Among these fifteen projects, only four projects are under BOT contracts and the remaining thirteen are under BOO contracts. Therefore, we estimate that when all of its projects in the portfolio commence operations in 2019F, CJE will still be able to keep its exposure to BOT contracts low at 16%.

Figure 8: CJE has little exposure to BOT contracts


More visible earnings and operating performance

BOO contracts have advantages over BOT contracts from the perspective of operators as well as investors, in our view:

(1) The ownership of plants and corresponding fixed assets will remain in the hands of the operator when the concession agreements end. In future bidding or negotiation for the next concession agreement, the previous operator may be more competitive than other bidders because it needs less new investment and it is able to accept lower waste handling fee. For BOT contracts, the assets are transferred back to local governments when the concession agreements end.

Title:

Source:


5.0%

13.4%

16.1%

24.8%

32.0%

5.1%

19,830 20,830 23,630

27,430

34,230

45,190 47,490

0%

5%

10%

15%

20%

25%

30%

35%

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2013 2014 2015 2016 2017F 2018F 2019F

(ton/day)

Capacity yoy chg

Title:

Source:


5.0%

9.6%

11.8%

14.0%

19.4%

16.9%16.1%

0%

5%

10%

15%

20%

25%

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2013 2014 2015 2016 2017F 2018F 2019F

(ton/day)

Capacity under BOO contracts Capacity under BOT contracts % capacity in BOT


7

(2) The reported financial information of BOO contracts can better reflect the actual earnings, operating performance and cash flows of the projects. For BOO contracts, the conventional accounting treatments are adopted so that the reported revenue reflects the income earned in carrying the waste treatment services and the sales of electricity recognised.

For BOT contracts, some future operation earnings are recognised in the pre-operational stage as the provision of construction services. In addition, the investments in the projects are classified as financial assets rather than fixed assets. Finance income, which is calculated based on the financial assets’ balances, is recognised as revenue for accounting purposes even though no such income is charged to local governments. Therefore, the reported earnings and operating cash flows may not directly reflect the actual figures. (For details about the accounting standards for BOT contracts, please refer to IFRIC 12 – Service Concession Arrangements).

Yet, BOO contracts may not be favoured by some local governments as the local governments may want to get back the assets and operate the projects themselves in future.

Advantages of CFB technology

Cheaper and lower pollutant emissions

In our view, the investing community does not have a thorough understanding of the CFB technology used in waste treatment because it is a relatively new technology and is not as common as the moving grate technology. CJE management estimates that two-thirds of the operating WTE facilities in China use moving grate and only one-third uses CFB. In addition, investors have better understanding of and higher confidence in moving grate technology through China Everbright International, a well-known listed WTE operator and a leader in moving grate technology.

CJE adopts CFB technology for most of its WTE projects. CFB is more suitable for cold weather and waste with low calorific value and high water content. Hence, it is more commonly adopted in the northern, northeastern and northwestern regions.

The major advantages of CFB technology are:

(1) effective burning of waste with low emission of SOx, NOx and dioxin, and

(2) low investment cost and hence low waste handling fees for local governments.

The disadvantages of CFB technology are:

(1) complicated operations, and

(2) coal consumption and high dust generation in burning, giving rise to higher operating costs.

To overcome the shortcomings of CFB, CJE has installed pre-treatment systems which can effectively keep the coal usage at 3% of the waste treated (in terms of tonnage). In FY16, it used 0.24m tons of coal in burning waste, accounting for only 3% of the 8.134m of waste treated. According to CJE’s management, CJE is at the low end of the industry range of 3-5% and has effective filtering systems to reduce dust emissions into the air.


8

Figure 9: Comparison between CFB and moving grate technology

SOURCES: CIMB, COMPANY

Financials

Net profit to grow 13.5% CAGR from FY16 to FY19F

We forecast CJE’s net profit to grow by 16.5% yoy to Rm696m in FY17F, followed by 12.8% yoy to Rmb785m in FY18F and 11.2% yoy to Rmb873m in FY19F, representing a 3-year CAGR (FY16-19F) of 13.5%.

Key factors are shown below:

(1) The increase of WTE operating capacity by 73% from 27,430tpd at end-2016 to 47,490tpd by end-2019F, resulting in 20.8% CAGR (FY16-19F) in the quantity of waste processed and 21.5% CAGR (FY16-19F) in electricity generation.

(2) For BOT construction, with the completion of construction for Songyuan Xinxiang and Wenling Green Energy and with the peak construction for Gaomi Lilangmingde in FY16, we believe the major contributors for BOT construction earnings in FY17F will be the Wenling Green Energy Expansion and Yinchuan Zhongke Expansion projects. Linzhou Jiasheng will start construction in FY17F but we expect the bulk of its construction earnings to be recognised in FY18F. The Wenling Green Energy Expansion and Yinchuan Zhongke Expansion are scheduled to be completed by end-FY17F whereas Linzhou project is targeted to commence operations in FY18F.

(3) We expect the gross profit from BOT construction to drop from Rmb122m in FY16 to Rmb55m in FY17F, rise by Rmb2m to Rmb57m in FY18F and go to zero in FY19F as the construction of all BOT contracts on hand are slated for completion by end-FY18F.

(4) We expect the gross profit from energy management contracting (EMC) business to drop from Rmb221m in FY16 to Rmb140m in FY19F as the profit sharing in existing EMC contracts gradually decreases.

(5) We expect gross profit margin to increase from 39.9% in FY16 to 47.0% in FY19F as the weighting of construction earnings, which carry lower gross margin of 13%, declines.

(6) We expect the gross margin of WTE business to improve from 42.4% in FY16 to 43.6% in FY19F as new projects ramp up with better utilisation.

(7) We expect the VAT refund (included in “Other income and gains”) to increase from Rmb77m in FY16 to Rmb155m in FY19F as the number of operating projects increase.

(8) We expect finance costs to increase from Rmb159m in FY16 to Rmb171m in FY17F, Rmb261m in FY18F and Rmb338m in FY19F. The significant

Circulating fluidised bed Moving grate

History of the technology A new technology Founded in Europe with long history

Popularity Introduced to China since 80s Common in China

Site area Large Small

Waste pretreatment Need sorting and shredding Not required

Operation Complicated Simple and easy

Time to reach optimal operation Start and close quickly Need longer time to heat up and cool down

More suitable for Waste with low calorific value Waste with higher calorific value

and high water content and low water content

Investment cost Rmb0.3m-0.4m/tonne Rmb0.4m-0.5m/tonne (domestic equipment)

Rmb0.7m-0.9m/tonne (imported equipment)

Operating costs High Low

Tipping fee Usually below Rmb60/tonne Higher, can be over Rmb100/tonne

Coal consumption 3-5% of waste (in term of tonnage) Not required

Dioxin emission Low High

Dust emission High (15,000-20,000mg/m3) Low (3500mg/m3)

SOx and NOx production Low Relatively high

Ash production <1% of waste Usually >5% of waste


9

increase is due to the massive capex required for the construction of the 16 WTE projects on hand.

Figure 10: CJE's FY15-19F revenue by business Figure 11: CJE's FY15-19F gross profit by business

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS

Figure 12: CJE's FY15-19F net profit Figure 13: CJE's FY15-19F profit margins


Stronger growth in the core WTE earnings

If the BOT construction earnings and the earnings from EMC business are excluded, CJE’s core net profit from WTE would have 3-year CAGR (FY16-19F) of 29.4%, based on our estimates. The two non-core earnings accounted for 41% of the reported net profit in FY16. We expect their weighting in net profit to drop to 25% in FY17F and further down to 12% in FY19F. The BOT construction gross profit are accounting earnings generated by the special accounting treatment adopted for BOT contracts.

Currently, the EMC business is generated from the contracts signed with the associates of Mr. Dou, the Controlling Shareholder, and/or the Jinjiang Group, their project companies and a third party for the provision of energy saving solutions. According to the contractual terms, CJE’s sharing in the savings of energy costs will progressively decrease in the next few years. CJE is actively looking to provide energy saving services to third parties. We have not factored in any such potential opportunities in our forecast.

Title:

Source:


783943

1,098

1,365

1,608

192

253300

386

462

367

425

499

616

709

273

283

233

233

182

302

708 420

437

20

20 39

57 72

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2015A 2016A 2017F 2018F 2019F

(Rmbm)

Sales of electricity Sales of steam Waste treatment fees

EMC business BOT construction Finance income

2016-19F CAGR: 4.9% Title:

Source:


546687

816

1,030

1,213215

221

180

179

140

39

12255

57

20

2039

57

72

0

200

400

600

800

1,000

1,200

1,400

1,600

2015A 2016A 2017F 2018F 2019F

(Rmbm)

WTE EMC BOT construction Finance income

2016-19F CAGR: 11%

Title:

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444

598696

785 873

22.8%

34.7%

16.5%

12.8%

11.2%

0%

5%

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40%

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(Rmbm)

Reported net profit yoy growth

Title:

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22.9% 22.7%

26.9%25.4%

28.8%

39.6%37.6%

43.0%

41.8%

49.0%

42.3%

39.9%

42.1%

42.8%47.0%

15%

20%

25%

30%

35%

40%

45%

50%

55%

2015A 2016A 2017F 2018F 2019F

Net margin Operating margin Gross margin


10

Figure 14: CJE's FY15-19F net profit excluding construction earnings

Figure 15: CJE's FY15-19F net profit excluding construction and EMC earnings


Potential earnings upside

Our forecasts are based on some conservative assumptions due to uncertainties for the time being. Hence, we believe potential earnings upside exists if the actual situation turns out to be more favourable. Our conservative assumptions include the following:

Speeding up the approvals for renewable power subsidy tariffs

In our model, we assume a three-year delay between the start of power generation and the commencement of subsidy payments by the government.

Retrospective payments of the unpaid subsidy tariffs

CJE starts to recognise the subsidy tariffs only when it officially receives the approvals from the government. There is no guarantee that the government will pay back all the subsidies which ought to have been paid in the previous years. If the subsidy is retrospectively paid, we expect that CJE would recognise the amounts in the current year’s revenue, giving rise to one-off earnings.

Signing EMC contracts with outside parties

So far, CJE’s EMC contracts are signed with the parent group and related parties. In our model, we have not factored in any potential EMC contracts to be signed with outside parties. CJE is actively looking for opportunities to provide energy management services to outsiders. If any such contracts are reached, it would provide potential earnings upside.

Securing more WTE projects

Besides the four projects under construction and the 15 projects in preparation, CJE is actively looking for investment opportunities in WTE. In the Thirteenth Five Year Plan, the government targets to increase the country’s WTE operating capacity by 151% (or 356,200 tonnes) over the five years. We expect CJE will be able to secure more WTE projects, which we believe will further boost earnings growth in FY19F and thereafter.

Net gearing will surge on Rmb6.7bn capex in 3 years

We expect CJE’s pipeline projects to require Rmb6.7bn capex in FY17-19F, of which about 90% will be spent in FY17-18F. Hence, we forecast CJE’s net gearing will increase from 40% at end-2016 to 64% at end-2017F and further up to 102% at end-2018F. In a previous analyst briefing, CJE’s management said that 100-110% net gearing ratio would still be acceptable. We believe there could be potential fund-raising in 2018F when net gearing peaks. However, we think the chance of fund-raising in the near term may be low given the company’s low valuation.

Title:

Source:


417511

656742

873

15.9%

22.6%

28.4%

13.1%

17.5%

0%

5%

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30%

0

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(Rmbm)

Net profit if construction earnings excluded yoy growth

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268354

525608

767

0.1%

32.1%

48.3%

15.8%

26.2%

0%

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20%

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50%

60%

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2015A 2016A 2017F 2018F 2019F

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Net profit if construction and EMC earnings excluded yoy growth


11

Figure 16: CJE's FY15-19Fnet debt amount and net gearing ratio

Figure 17: CJE's FY15-19F estimated capex and operating cash flows


50% dividend payout targeted for FY16 and FY17F

CJE’s management has recommended paying out 50% of FY16 net profit as dividend and plans to keep the same payout ratio in FY17F, according to its guidance. We estimate that CJE will need to pay total dividend of Rmb640m in FY16-17F, translating into dividend yield of 5.9% in FY16 and 6.6% in FY17F.

Figure 18: CJE's profit and loss and major assumptions


Title:

Source:


1,960 1,819

3,218

5,546 5,249

56%

40%

64%

102%

86%

0%

20%

40%

60%

80%

100%

120%

-

1,000

2,000

3,000

4,000

5,000

6,000

2015 2016A 2017F 2018F 2019F

(Rmbm)

Net debt Net gearing ratio

Title:

Source:


1,183

1,891

2,905

3,160

630 638 492

1,236

998

1,429

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2015 2016A 2017F 2018F 2019F

(Rmbm)

Capex Operating cash flows

(Rmb m) FY15A FY16F FY17F FY18F FY19F FY15A FY16F FY17F FY18F FY19F

Revenue

Sales of electricity and steam 974.5 1,196.1 1,398.2 1,751.1 2,070.2 29.0% 22.7% 16.9% 25.2% 18.2%

Waste treatment 366.7 424.7 499.2 615.9 709.0 8.2% 15.8% 17.6% 23.4% 15.1%

EMC business 273.4 283.3 233.4 232.5 182.4 86.3% 3.6% -17.6% -0.4% -21.6%

BOT construction 301.9 708.2 420.0 436.8 - 1552.2% 134.6% -40.7% 4.0% -100.0%

Financial income 19.9 19.6 38.8 57.2 71.8 95.3% -1.4% 98.1% 47.2% 25.6%

Total revenue 1,936.3 2,631.9 2,589.6 3,093.5 3,033.4 52.5% 35.9% -1.6% 19.5% -1.9%

Gross profit

WTE 545.6 687.2 815.9 1,029.8 1,212.5 12.7% 26.0% 18.7% 26.2% 17.7%

EMC business 214.8 220.9 179.7 179.0 140.4 72.6% 2.8% -18.6% -0.4% -21.6%

BOT construction 38.7 121.7 54.6 56.8 - 1862.9% 214.5% -55.1% 4.0% -100.0%

Finance income 19.9 19.6 38.8 57.2 71.8 95.5% -1.5% 98.2% 47.2% 25.6%

Total gross profit 819.0 1,049.4 1,089.0 1,322.7 1,424.8 31.9% 28.1% 3.8% 21.5% 7.7%

Other income & gains 106.2 145.7 216.5 193.5 301.4 109.4% 37.1% 48.5% -10.6% 55.8%

Administrative expenses (157.8) (205.4) (192.7) (221.8) (239.6) 16.4% 30.1% -6.2% 15.1% 8.0%

Operating profit 767.4 989.7 1,112.8 1,294.4 1,486.6 43.2% 29.0% 12.4% 16.3% 14.8%

Finance costs (124.1) (159.7) (171.3) (261.0) (337.9) 48.2% 28.7% 7.3% 52.4% 29.5%

Pretax 643.3 830.0 941.5 1,033.4 1,148.7 42.2% 29.0% 13.4% 9.8% 11.2%

Taxation (197.4) (240.0) (254.2) (258.4) (287.2) 56.2% 21.6% 5.9% 1.6% 11.2%

Minorities (2.2) 7.6 8.9 10.0 11.1 -172.7% -443.4% 16.5% 12.8% 11.2%

Net profit 443.7 597.6 696.2 785.1 872.7 34.9% 34.7% 16.5% 12.8% 11.2%

Gross margin

WTE 40.7% 42.4% 43.0% 43.5% 43.6% -3.6% 1.7% 0.6% 0.5% 0.1%

EMC business 78.6% 78.0% 77.0% 77.0% 77.0% -6.3% -0.6% -1.0% 0.0% 0.0%

BOT construction 12.8% 17.2% 13.0% 13.0% - 2.0% 4.4% -4.2% 0.0% -

Average gross margin 42.3% 39.9% 42.1% 42.8% 47.0% -6.6% -2.4% 2.2% 0.7% 4.2%

Operating margin 39.6% 37.6% 43.0% 41.8% 49.0% -2.6% -2.0% 5.4% -1.1% 7.2%

Net margin 22.9% 22.7% 26.9% 25.4% 28.8% -3.0% -0.2% 4.2% -1.5% 3.4%

Waste processed ('000 tonnes) 6,928 8,134 9,914 12,284 14,351 6.3% 17.4% 21.9% 23.9% 16.8%

Electricity generation (bn kWh) 1,985 2,314 2,821 3,533 4,155 13.1% 16.6% 21.9% 25.3% 17.6%

Yr-end operating capacity (tpd) 23,630 27,430 34,230 45,190 47,490 13.4% 16.1% 24.8% 32.0% 5.1%

YoY chg


12

Figure 19: CJE's balance sheet


Figure 20: CJE's cash flow


(Rmb m) FY15A FY16F FY17F FY18F FY19F

Non-current assets

Fixed assets 4,942.5 5,525.8 7,752.0 10,125.1 10,234.3

Intangible assets 1,006.7 1,550.5 1,541.7 2,039.8 1,965.9

Investment in an associate 43.8 43.8 43.8 43.8 43.8

Others 525.3 800.9 891.5 1,206.5 1,323.2

Total non-current assets 6,518.3 7,921.1 10,229.1 13,415.2 13,567.2

Current assets

Cash 380.5 540.9 241.2 301.7 595.7

Trade and other receivables 438.4 679.7 696.7 879.7 981.9

Others 427.0 588.2 278.4 310.3 303.6

Total current assets 1,245.8 1,808.8 1,216.4 1,491.7 1,881.1

Current liabilities

Trade and other payables 671.0 930.2 1,056.4 1,571.0 1,337.7

Borrowings 534.4 989.7 1,037.8 1,757.8 1,757.8

Obligations under finance leases 115.9 267.1 293.9 323.2 355.6

Others 339.7 513.6 506.4 504.8 522.0

Total current liabilities 1,661.1 2,700.6 2,894.5 4,156.9 3,973.1

Non-current liabilities

Borrowings 1,806.3 1,369.8 2,421.6 4,101.6 4,101.6

Obligations under finance leases 443.7 637.8 701.6 771.8 848.9

Others 358.2 430.3 430.1 432.1 431.9

Total non-current liabilities 2,608.2 2,437.9 3,553.3 5,305.5 5,382.4

3,494.8 4,591.3 4,997.6 5,444.6 6,092.8

Share capital 0.1 0.1 0.1 0.1 0.1

Reserves 3,310.5 4,422.6 4,820.0 5,257.0 5,894.1

Shareholders equity 3,310.6 4,422.7 4,820.1 5,257.1 5,894.2

Minority interests 184.3 168.6 177.5 187.5 198.6

Total equity 3,494.8 4,591.3 4,997.6 5,444.6 6,092.8

Net debt 1,960.2 1,818.6 3,218.2 5,557.7 5,263.8

Net debt/equity 56.1% 39.6% 64.4% 102.1% 86.4%

(Rmb m) FY15A FY16F FY17F FY18F FY19F

Operating activities

Profit before tax 643.3 830.0 941.5 1,033.4 1,148.7

Non-cash adjustments 307.6 406.9 499.6 670.3 845.8

Changes in working capital (181.7) (585.6) 55.2 (445.2) (295.7)

Income tax paid (131.5) (159.4) (260.0) (260.0) (270.0)

Net cash from operating activities 637.8 491.9 1,236.3 998.4 1,428.7

Investing activities

Capex (920.0) (795.5) (2,540.0) (2,780.0) (630.0)

Acquisition of subsidiaries (82.7) (508.4) - - -

Interest received 2.0 3.4 3.8 1.0 3.0

Others 24.3 (86.8) 307.8 (13.8) (14.5)

Net cash used in investing activities (976.4) (1,387.3) (2,228.4) (2,792.8) (641.5)

Financing activities

Proceeds from borrowings (net) 467.7 18.7 1,100.0 2,400.0 -

Proceeds from obligations under finance leases (net) 493.6 348.7 90.5 99.5 109.5

Payments of finance costs (130.6) (172.0) (199.2) (296.6) (367.3)

Share issuance (net of costs) - 928.1 - - -

Dividends paid (15.1) (1.7) (298.8) (348.1) (235.5)

Others (330.2) (66.1) - - -

Net cash from financing activities 485.5 1,055.7 692.5 1,854.8 (493.3)

(Decrease)/increase in cash 146.8 160.3 (299.6) 60.5 293.9

Cash opening 233.7 380.5 540.9 241.2 301.7

Cash closing 380.5 540.9 241.2 301.7 595.7


13

Comparing with CEI and Canvest

CJE has long history of focus on WTE

CJE is one of the first WTE operators in China with its first WTE facilities commencing operations in 1998. It was also the first WTE operator to introduce CBR technology in China. CJE is very focused on municipal waste management, unlike its close peer, China Everbright International (CEI), which also participates in waste water treatment, renewable energy and biomass projects. Despite the lack of governmental backing, CJE was still able to expand its WTE portfolio and establish an extensive network in the past twenty years.

Figure 21: Comparing the history and background of CJE, CEI and Canvest


CJE has a more geographically diversified portfolio

CJE’s WTE portfolio is slightly smaller than CEI but its operating capacity (at end-2016) was 20% larger than CEI’s. CJE’s portfolio is more geographically diversified over 16 provinces. CEI is focused on only nine provinces, especially the wealthy provinces of Jiangsu and Shandong. CJE also has significant exposure in Zhejiang and Shandong. The more affordable investment cost and tipping fee also make CJE’s CFB facilities welcomed in the northern and central regions. Canvest has strong presence in southern China. In particular, Guangdong accounts for 80% of its total capacity.

Most of CJE’s projects are in BOO format

CJE has 84% of its portfolio capacity is in BOO concession format and only 16% in BOT format. CEI has 90% of its projects in BOT format and Canvest 67%. Therefore, CJE has less construction earnings, which are the accounting profit recognised based on the special accounting treatment for BOT contracts. CJE’s reported net profit better reflects the actual profits generated from its operations, in our view.

CJE has lower capex per tonne

CJE’s investment cost for operating facilities is Rmb0.27m/tonne, which is significantly lower than CEI’s Rmb0.52m/tonne and Canvest’s Rmb0.5m-0.6m/tonne. This is mainly due to the lower investment required for CJE’s CFB technology vs. the moving grate technology used by the two peers. The low investment cost allows CJE’s projects to accept lower waste handling fees without significant pressure on investment returns. On average, CJE’s waste handling fee is at around 20% discount to CEI’s and over 40% discount to Canvest’s.

All targeting robust capacity growth by end-2018F

CJE has 20,060 tonnes of capacity under construction or close to commence construction, representing 73% of its existing operating capacity. We expect 89% of these new capacities will commence operations in 2017F and 2018F, implying that CJE’s operating capacity will grow by 65% from end-16 to end-18F.

CEI has 22,900 tonnes operating capacity and 27,150 tonnes of capacity in the pipeline. Among the pipeline capacity, 15,800 tonnes are currently under

CJE CEI Canvest

History in WTE Since 1998 Since 2005 Since 2004

State-owned backing? Private enterprise State-owned Private enterprise

Scope of business Waste treatment, energy Waste treatment, equipment WTE

management services manufacturing, water treatment

biomass, wind and solar power

Listing date Aug 16 Long listing history; started Dec 14

to transform from a conglomerate

to an environmental specialist

in 2002-2003


14

construction, scheduled to be completed in phases this year and next year. That means its operating capacity is likely to increase by 69% from end-2016 to end-2018F. For the 11,350 tonnes of capacity in preparation, the construction timing is not confirmed. Hence, we expect them to commence operations after 2018F.

Canvest’s capacity under construction or in preparation is a total of 10,740 tonnes. If the 1,040 tonnes management contract is excluded, its pipeline capacity would be 9,700 tonnes, or 128% of its existing operating capacity. However, according to management, only 5,900 tonnes of new capacity will commence operation by end-2018F. That means Canvest’s operating capacity will grow 78% from end-2016 to end-2018F, based on our calculations.

Figure 22: Comparing the WTE portfolios of CJE, CEI and Canvest


CJE’s low investment cost gives good returns

CJE has lower utilisation and electricity output per tonne of waste than CEI and Canvest. We think this is mainly due to its exposure in northern, northeastern and northwestern regions where the calorific value of waste is usually lower. CEI and Canvest have high exposure in the wealthy regions of Yangtze River Delta and Pearl River Delta. Despite that, we think CJE’s average utilisation of 89% (in FY16) is still a satisfactory level.

CJE and CEI also participate in businesses other than WTE. Therefore, we focus on the financial performance of their WTE businesses rather than the company’s overall financial figures.

CJE CEI Canvest

Operating capacity (end-16) (tpd) 27,430 22,900 7,600

No. of operating projects 19 27 5

Capacity under construction/in preparation (end-16) (tpd) 20,060 27,150 10,740

No. of projects under construction/in preparation 19 31 7

Total capacity in the portfolio (end-16) (tpd) 47,490 50,050 18,340

Total no. of projects in the portfolio 38 58 12

Capacity by type of concession agreement:

BOO (tpd) 39,840 3,200 5,100

BOT (tpd) 7,650 44,850 12,200

Others (tpd) - 2,000 1,040

Total capacity (tpd) 47,490 50,050 18,340

Capacity by location:

Jiangsu (tpd) 1,500 24,000 -

Zhejiang (tpd) 5,350 5,500 -

Shandong (tpd) 6,000 12,150 -

Henan (tpd) 3,840 2,200 -

Hunan (tpd) 1,000 1,500 -

Anhui (tpd) 2,200 800 -

Guangdong (tpd) 1,500 1,650 14,740

Sichuan (tpd) - 1,200 -

Hainan (tpd) - 1,050 -

Yunnan (tpd) 3,000 - -

Hubei (tpd) 4,800 - -

Jilin (tpd) 4,540 - -

Inner Mongolia (tpd) 2,700 - -

Ningxia (tpd) 3,000 - -

Tianjin (tpd) 1,100 - -

Heilongjiang (tpd) 1,800 - -

Hebei (tpd) 4,000 - -

Shaanxi (tpd) 1,000 - -

Guangxi (tpd) - - 2,550

Guizhou (tpd) - - 1,050

Total capacity (tpd) 47,330 50,050 18,340

Investment - operating capacity (Rmb m) 7,386 11,826 N/A

Cost per capacity - operating capacity (Rmbm/tpd) 0.27 0.52 0.5-0.6

Investment - under construction/in preparation (Rmb m) 7,630 11,835 N/A

Cost per capacity - under construction/in preparation (Rmbm/tpd) 0.40 0.44 0.5-0.6

Waste handling fee for operating facilities (Rmb/tonne) 57 over 70 102


15

CEI and Canvest have larger portions of projects in BOT format, where the accounting rules require the recognition of construction earnings before the operations start and revenue is generated. However, CJE has most of its projects in BOO format with no recognition of construction earnings at pre-operational stage.

For comparison purposes, we think it is more appropriate to exclude the construction earnings. CJE has EBIT-to-total assets ratio of 6.9% in WTE business, which is higher than CEI’s 3.9% and Canvest’s 3.1%. That means CJE’s low investment costs in WTE projects can fully compensate for its low waste handling fees and provide good project returns, in our view.

Figure 23: Comparing the operating and financial performance of CJE, CEI and Canvest


Risks

Construction risk

There exists a risk that the construction of WTE facilities would be delayed and construction costs could be overrun, in our view. In such cases, the WTE operators may not obtain compensation from local governments. The delay in construction could be the result of incorrect estimation of the complexity of the construction works by the WTE operators and objections by local residents.

CJE (FY16) CEI (FY16) Canvest (1H16)

Waste treated (m tonne) 8.13 8.93 1.10

Electricity generation (bn kWh) 2.31 2.81 0.44

Electricity/tons of waste treated (kWh/tonne) 284 315 400

On-grid electricity/electricity generated (%) 74% 88% 88%

Steam supplied (m tonne) 1.99 - -

FY16 average utilisation in WTE (estimated) (%) 89% 124% 97%

Revenue breakdown

WTE (Rmb m) 2,349 7,036 596

WTE operation revenue (Rmb m) 1,621 995 334

WTE BOT construction (Rmb m) 708 5,144 248

WTE finance income (Rmb m) 20 897 14

Others (Rmb m) 283 5,399 -

Total revenue (Rmb m) 2,632 12,434 596

EBITDA breakdown

WTE (Rmb m) 1,081 2,937 254

WTE operation (Rmb m) 940 857 201

WTE BOT construction (Rmb m) 122 1,183 39

WTE finance income (Rmb m) 20 897 14

Others (Rmb m) 225 1,659 -

Total EBITDA (Rmb m) 1,306 4,596 254

Net profit (FY16) (Rmb m) 598 2,479 137

Company's EBITDA margin (%) 49.6% 37.0% 42.5%

Company's operating margin (%) 46.0% 41.7% 42.5%

Company's net profit margin (%) 58.5% 92.7% 61.7%

Company's total assets (%) 22.7% 19.9% 23.0%

Company's ROE (Rmb m) 9,730 44,083 4,775

Company's ROA (Rmb m) 8,476 21,829 4,775

Net gearing (%) 13.5% 16.0% 11.7%

EBITDA margin for WTE (including BOT construction) (%) 46.0% 41.7% 42.5%

EBITDA margin for WTE (excluding BOT construction) (%) 58.5% 92.7% 61.7%

EBIT margin for WTE (including BOT construction) (%) 33.7% 41.0% 31.5%

EBIT margin for WTE (excluding BOT construction) (%) 40.9% 90.0% 42.8%

Total assets for WTE (Rmb m) 8,476 21,829 4,775

EBIT/Total assets for WTE (%) 6.9% 3.9% 3.1%


16

Counterparty risk

Each WTE contract is signed between the operator and local government. Therefore, we believe there is a risk that local governments do not honour their contracts, including the payment of waste treatment fees and the fulfilment of minimum guaranteed quantity of waste to be processed. In addition, any dispute with local governments could result in termination of the concession agreements, in our view, and eventually economic losses to WTE operators.

Collection of renewable subsidy

The subsidy for WTE is the difference between the WTE statutory tariff and the benchmark electricity tariff. Benchmark electricity tariff is taken to be the local coal-fired power tariff. Benchmark tariff is payable by local power grids with only a short time lag of one month normally. The subsidy is paid out of the National Renewable Energy fund. NDRC approves each renewable energy project for the subsidy but there is no guarantee how long the approval process will take.

The latest batch of subsidy approvals took about 2-3 years. Once the project is approved for renewable subsidy, the subsidy will usually be paid every quarter. Hence, there is a risk involving the time needed to obtain the renewable subsidy approval, in our view. Even if the project is approved for subsidy, there is uncertainty about the subsidy payments for retrospective years, i.e. the period between the commencement of power sales and the granting of approval for renewable subsidy.

Unlike most of the environmental peers, CJE conservatively recognises the subsidy tariff only when NDRC’s renewable approval is granted. CJE will recognise the subsidy for retrospective years when the subsidy is received. Hence, we believe there should be limited risk in the collection of CJE’s subsidy receivables.

Alteration of electricity tariffs

The electricity tariff for WTE in China is statutorily set by NDRC at Rmb0.65/kWh. If NDRC cuts the statutory electricity tariff for WTE, especially the operating projects, there would be an impact on CJE’s profits and investment returns. However, as the government intends to push for WTE aggressively over the Thirteenth Five Year Period, we think the risk of tariff cuts in the next few years is rather low.

Interest risk

We expect CJE’s debt level to increase significantly in 2017F and 2018F as many new WTE projects will commence construction. Hence, CJE would be more vulnerable to the risk of interest rate hikes.

The risk that the two pre-IPO investors and cornerstone investors sell down their shareholdings

There is risk that the two pre-IPO investors, Radec XIX and AEP Investments, and the three cornerstone investors at the IPO sell down their shareholdings. Radec XIX’s and AEP Investments’s lock-up periods ended on 3 Feb 2017. There is no lock-up period for the three cornerstone investors.

Valuation and recommendations

Setting target price to the DCF value of S$1.10/share

We peg our target price to the DCF value of S$1.1/share, which is translated into 9.5x FY17F P/E. In our calculation, we assume zero value for each of it’s BOO projects at the end of the concession period even though CJE will still have ownership of the assets. We factor in only the operating projects, projects under construction and projects in preparation. If CJE secures more WTE projects, there may be further upside potential in its DCF value.


17

Figure 24: CJE's DCF value


Unjustified low valuation; initiate with Add rating

CJE is trading at FY17F P/E of 7.3x, which is at a 46% discount to peers’ average P/E of 13.4x and is the lowest among listed China environmental companies. CJE is also at the low end of the industry range of EV/EBITDA (FY17F) and P/BV (FY16). More importantly, its management recommends to pay 50% net profit as dividend this year and intends to keep a similar payout ratio next year. CJE offers dividend yield of 5.9-6.6% in FY16 and FY17F, which is significantly higher than other environmental stocks in the market.

We believe CJE’s low valuation is unjustified given that CJE has (1) the longest history in China’s WTE industry, (2) the largest operating WTE portfolio, (3) expertise and market recognition in the industry, and (4) good earnings growth prospects. One may criticise that CJE does not have governmental backing and thus should deserve a lower valuation. However, the three private enterprises, CTEG, Dongjiang and Canvest, are also traded at higher P/E multiples.

We see a re-rating opportunity if investors have further understanding about the company and are more convinced by its attractive earnings growth prospects. CJE will commence the construction of its large number of WTE projects on hand this year and we expect it will continue to secure more WTE projects, which are the key catalysts, in our view.

Year (Rmb m) FY17F FY18F FY19F FY20F FY21F FY22F FY23F FY24F FY25F FY26F FY27F FY28F FY29F FY30F FY31F

Operating cashflow 1.2 1.0 1.4 1.6 1.7 1.8 1.8 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9

Capex (2.5) (2.8) (0.6) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3)

Free CF (1.3) (1.8) 0.8 1.3 1.4 1.5 1.5 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6

Present values (1.3) (1.6) 0.7 1.0 1.0 0.9 0.9 0.8 0.8 0.7 0.6 0.6 0.5 0.5 0.4

Year (Rmb m) FY32F FY33F FY34F FY35F FY36F FY37F FY38F FY39F FY40F FY41F FY42F FY43F FY44F FY45F FY46F

Operating cashflow 1.9 1.9 1.8 1.7 1.6 1.6 1.5 1.3 1.2 1.1 1.0 0.9 0.7 0.6 0.4

Capex (0.3) (0.3) (0.3) (0.3) (0.3) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.1) (0.1) (0.1) (0.1)

Free CF 1.6 1.6 1.5 1.4 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4

Present values 0.4 0.4 0.3 0.3 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0

Total present values (Rmb bn) 10.2

Less: net debt (Rmb bn) (3.2)

DCF value (Rmb bn) 7.0

DCF value (SGD bn) 1.3 (S$1 = Rmb5.2)

DCF/share (SGD) 1.10

WACC calculation

Risk-free rate 3.3%

Market risk premium 8.8%

Total market return 12.1%

Beta 1.2

Cost of equity 13.9%

Cost of debt 4.3%

WACC 9.9%

Terminal value Assuming nil value at the end of concession period


18

Figure 25: CJE has low P/E but high EPS CAGR (FY15-18F) relative to most peers

Figure 26: CJE has low EV/EBITDA (FY17F) and P/B (FY16) relative to most peers

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

Figure 27: Sector Comparisons

SOURCES: CIMB, BLOOMBERG

Title:

Source:


0

5

10

15

20

25

0% 5% 10% 15% 20% 25% 30% 35%

(x)

CanvestDongjiang

CEI

BEW

Dynagreen

CEW

SIIC

CTEG

TianjinCapital

CJE

CJE (excluding

BOT and EMC earnings)

CITIC Envirotech

PEG = 1x

GDI

Kangda

ChinaWater Affairs

Title:

Source:


0

2

4

6

8

10

12

14

16

18

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

EV/E

BIT

DA

P/BV

Canvest

DongjiangCEI

BEW

Dynagreen

CEWL

SIIC

CTEG

Tianjin Capital

CJE

CITIC

Envirotech

China Water Affairs

GDI

Kangda

Bloomberg Price

Target

Price

Market

Cap

3-year

EPS

Company Ticker Recom. (local curr) (local curr) (US$ bn) FY16F FY17F FY18F CAGR (%) FY16F FY17F FY18F FY16F FY17F FY18F FY16F FY17F FY18F FY16F FY17F FY18F

Waste treatment

China Jinjiang CJE SP Add 0.85 1.10 0.74 8.5 7.30 6.5 20.9% 1.15 1.1 1.0 15.5% 15.1% 15.6% 8.0 9.09 9.5 5.9% 6.8% 4.6%

China Everbright 257 HK Hold 10.78 8.80 6.20 17.4 15.40 12.0 24.3% 2.27 2.3 2.0 16.1% 15.5% 17.9% 11.6 15.20 12.8 1.9% 1.9% 2.4%

Canvest 1381 HK Not Rated 4.61 N/A 1.20 24.7 19.40 16.1 27.5% 3.40 2.8 3.1 14.8% 15.7% 15.8% 15.9 12.00 10.0 0.5% 0.7% 0.9%

Dongjiang Environmental 895 HK Not Rated 14.00 N/A 1.59 24.2 19.40 15.9 28.0% 3.50 3.0 2.6 15.4% 15.8% 15.3% 21.3 16.30 13.6 0.9% 1.1% 1.3%

Dynagreen 1330 HK Not Rated 4.32 N/A 0.58 12.7 9.70 8.5 25.9% 1.50 1.3 1.1 12.3% 13.9% 13.9% 10.6 8.00 6.5 1.2% 1.6% 1.8%

Avg of waste treatment 17.5 14.24 11.8 25.3% 2.36 2.1 2.0 14.8% 15.2% 15.7% 13.5 12.12 10.5 2.1% 2.4% 2.2%

Water treatment

Beijing Enterprises Water 371 HK Add 5.87 6.20 6.57 15.0 13.30 10.9 24.2% 3.20 2.8 2.2 19.4% 19.6% 21.0% 16.2 13.20 14.2 2.3% 2.8% 3.4%

China Everbright Water CEWL SP Hold 0.47 0.67 0.91 19.2 12.80 10.2 17.6% 0.93 0.9 0.8 5.0% 7.1% 8.3% 13.2 12.20 11.0 0.7% 0.7% 0.7%

China Water Affairs 855 HK Not Rated 5.16 N/A 1.00 10.8 9.25 7.7 25.3% 1.43 1.3 1.0 14.1% 13.9% 13.1% 7.6 6.80 5.8 2.0% 2.4% 2.8%

CT Environmental Group 1363 HK Add 1.86 3.00 1.46 15.0 12.40 10.6 16.0% 3.00 2.5 2.1 20.8% 21.0% 21.0% 11.0 8.70 7.4 1.4% 1.6% 2.0%

CITIC Envirotech CEL SP Add 0.82 0.93 1.30 22.6 20.90 17.0 24.3% 1.34 1.3 1.2 9.3% 9.3% 10.3% 13.5 12.80 11.9 1.4% 1.0% 1.0%

Guangdong Investment 270 HK Not Rated 11.34 N/A 9.11 16.0 14.50 13.9 9.4% 2.10 2.0 1.9 13.5% 14.0% 13.8% 9.8 9.00 8.6 3.4% 3.9% 4.3%

Kangda 6136 HK Not Rated 2.26 N/A 0.60 12.1 9.20 7.5 19.7% 1.20 1.0 0.9 9.5% 11.5% 12.2% 10.9 8.80 7.4 0.9% 1.1% 1.1%

SIIC SIIC SP Not Rated 0.53 N/A 0.84 18.1 11.00 9.5 17.2% 0.96 0.9 0.9 7.9% 8.2% 8.9% 23.9 13.20 11.1 0.0% 0.7% 1.0%

Tianjin Capital - H 1065 HK Not Rated 4.42 N/A 0.81 14.5 13.50 12.1 12.2% 1.16 1.1 1.0 8.7% 9.0% 9.2% 11.6 11.00 9.8 1.7% 1.9% 2.1%

Avg of water treatment 15.9 12.98 11.0 18.4% 1.70 1.5 1.3 12.0% 12.6% 13.1% 13.1 10.63 9.7 1.5% 1.8% 2.0%

Avg of environmental sector 16.5 13.43 11.3 20.9% 1.94 1.7 1.5 13.0% 13.5% 14.0% 13.2 11.16 10.0 1.7% 2.0% 2.1%

Core P/E (x) P/BV (x) Recurring ROE (%) EV/EBITDA (x) Dividend Yield (%)


19

Appendix

CJE’s WTE portfolio

Figure 28: CJE's WTE projects


Expected Installed Type of Investment Tipping Electricity

commencement capacity concession cost Constructed or fee tariff

Project Location of operations (t/d) agreement (Rmb m) acquired? Stake (Rmb/ton) (Rmb/kWh)

Operating

Hangzhou Yuhang Hangzhou, Zhejiang Aug-98 700 BOO 138.3 Constructed 100% 68.52 0.65

Zhengzhou Xingjin Zhengzhou, Henan Sep-02 2,840 BOO 436.4 Constructed 100% 50 0.5087

Wuhu Jinjiang Wuhu, Anhui Jan-03 2,200 BOO 433.9 Constructed 100% 45 0.5339

Xiaoshan Jinjiang Hangzhou, Zhejiang Jul-07 1,300 BOO 322.0 Constructed 90% 80 0.65

Zibo Jinjiang Zibo, Shandong Jul-07 2,000 BOO 291.1 Acquired in Jun 06, constructed by CJE 100% 35 0.65

Kunming Jinjiang Kunming, Yunnan Jan-08 1,200 BOO 364.2 Acquired in Feb 06, constructed by CJE 80% 90 0.65

Wuhan Jinjiang Wuhan, Hubei Jun-10 2,600 BOO 438.8 Constructed 100% 60 0.66

Hankou Jinjiang Wuhan, Hubei Dec-10 2,200 BOO 445.9 Constructed 100% 60 0.65

Lianyungang Sunrise Lianyungang, Jiangsu Apr-10 1,500 BOO 422.5 Acquired in Feb 11 100% 46 0.65

Jilin Xinxiang Changchun, Jilin Sep-04 1,690 BOO 559.5 Acquired in Sep 11 80% 41 0.65-0.97

Yunnan Energy Kunming, Yunnan Jun-11 1,000 BOT 310.6 Constructed 89% 90 0.65

PLT Energy Baotou, Inner Mongolia Dec-12 1,200 BOO 417.1 Acquired in Feb 11, constructed by CJE 42% 60 0.65

Yinchuan Zhongke Yinchuan, Ningxia Jan-14 1,000 BOT 365.0 Acquired in Jun 11, constructed by CJE 100% 55 0.65

Tianjin Sunrise Tianjin Apr-08 1,100 BOO 419.7 Acquired in Dec 13 100% 55-96 0.65

Zibo Green Energy Zibo, Shandong Sep-14 1,200 BOO 394.6 Constructed 100% 35 0.65

Suihua Green Energy Suihua, Heilongjiang Jul-15 800 BOO 300.0 Constructed 100% 35 0.65

Songyuan Xinxiang Songyuan, Jilin late 3Q16 1,050 BOT 356.0 Constructed 80% 29.6 0.65

Zhuji Bafang Zhuji, Zhejiang Sep-04 1,050 BOO 600.0 Acquired in Dec 16 100% 90 0.65

Wenling Green Energy Wenling, Zhejiang Feb-16 800 BOT 370.0 Acquired in Dec 16 100% 46 0.65

Subtotal 27,430 7,385.5

Under construction

Hothot New Energy Hothot, Inner Mongolia 2Q-17 1,000 BOO 360.0 Constructed 100% 60 0.65

Qitaihe Green Energy Qitaihe, Heilongjiang 2Q-17 1,000 BOO 340.0 Constructed 100% 35 0.65

Gaomi Lilangmingde Gaomi, Shandong Trial in Jan 17 800 BOT 350.0 Acquired in Dec 15, constructed by CJE 100% 49-70 0.65

Zibo New Energy Linzi, Shandong 4Q17 2,000 BOO 1,190.0 Constructed 100% 30-40 0.65

Subtotal 4,800 2,240.0

In preparation

Yueyang Sunrise Yueyang, Hunan 2017/18 1,000 BOO 550.0 Constructed 45%

Baishan Green Energy Baishan, Jilin 2017/18 1,000 BOO 400.0 Constructed 100%

Gaozhou Green Energy Gaozhou, Guangdong 2018 1,500 BOO 550.0 Constructed 100%

Hunchun Green Energy Hunchun, Jilin 2019 800 BOO 350.0 Constructed 100%

Linzhou Jiasheng Linzhou, Henan 2018 1,000 BOT 400.0 Constructed 100%

Shijiazhuang Jiasheng Shijiazhuang, Hebei 2018 3,000 BOO 700.0 Constructed 82%

Yulin Green Energy Yulin, Shaanxi 2018 1,000 BOO 400.0 Constructed 100%

Yunnan Jinde Pu'er, Yunnan 2018 800 BOO 350.0 Constructed 51%

Zhongw ei Green Energy Zhongw ei, Ningxia 2019 1,000 BOO 400.0 Constructed 100%

Manzhoull Green Energy Inner Mongolia 2019 500 BOO 300.0 Constructed 100%

Tangshan Jiasheng Tangshan, Hebei 2017/18 1,000 BOO 400.0 Constructed 100%

Kunshan Jinkangrui Kunshan, Jiangsu 2017/18 160 - 20.0 Constructed 100%

Zhuji Bafang Expansion Zhuji, Zhejiang 2018 500 BOO 270.0 Constructed 100%

Wenling Green Energy Wenling, Zhejiang end-17 1,000 BOT 150.0 Constructed 100%

Yinchuan Zhongke Expansion Yinchuan, Ningxia end-17 1,000 BOT 150.0 Constructed 100%

Subtotal 15,260 5,390.0

Total 47,490 15,016


20

Shareholding structure

Figure 29: CJE’s shareholding structure and shareholders’ background


Jinjiang Group

Jinjiang Group (Hangzhou Jinjiang) is a private enterprise established in 1993 by Mr. Dou Zhenggang, who is the founder and the controlling shareholder of the group. Jinjiang Group is engaged in metallurgical and chemical industries in China, including the production of aluminium and aluminium oxide.

Radec XIX and AEP Investments

Radec XIX and AEP Investments subscribed for the Series A redeemable preferred shares of China Green Energy in 2010. After the corporate reorganisation and before IPO, Radec XIX and AEP Investments held 18.1% and 6.9% of CJE. After listing, their shareholdings have changed to 14.84% and 6.7% respectively. Both Radec XIX and AEP Investments have lock-up period of six months from the listing date of 3 Aug 2016. The lock-up period has since ended on 3 Feb 2017.

Cornerstone investors

Three cornerstone investors were introduced at the same time the IPO, namely Zhejiang United Investment (HK) Limited, HFI International (HK) Limited and CHINT Hong Kong American Investment Limited. They subscribed for a total of 112.4m new shares, representing 9.2% of CJE’s total number of issued shares after IPO (including shares issued under over-allotment option). There is no lock-up period for the shares subscribed by the three cornerstone investors.


21

Figure 30: CJE's shareholdings


Biography of key management

Figure 31: Biography of CJE's key management


Awards won by CJE

Figure 32: Major awards received by CJE in recent years


Shareholders Shares held (m) Shareholding

China Green Energy 474.2 39.0%

Win Charm (wholly owned subsidiary of Hangzhou Jinjiang) 275.7 22.7%

Radec XIX 180.6 14.8%

AEP Investments 69.5 5.7%

Shares issued before IPO and cornerstone investors 1,000.0 82.2%

Cornerstone investors 112.4 9.2%

IPO

including: placement 87.8 7.2%

public offer 4.6 0.4%

over-allotment 12.0 1.0%

Shares issued in IPO 104.4 8.6%

Total no. of shares issued 1,216.8 100.0%

Management Title Responsibilities and background

Wang Yuanluo Executive Chairman & CEO Ms. Wang is responsible for overall strategic planning, major investment, human resources and financial

management of the group. Ms. Wang was involved in the management of Jinjiang Group's green energy business

since 1995. In 2014, Ms. Wang was a director of China Green Energy and Green Energy Hangzhou. In 2010,

Ms. Wang was appointed as a director of CJE following its incorporation. Ms. Wang is well-regarded in the industry

and has received several awards and recognitions, including Vice President of China Environment Service Industry

Association, Vice President of China Association of Circular Economy, the President of the Zhejiang Green Industry

Promotion Association, Vice President of the Zhejiang Environmental Protection Industry Association and Vice

President of the Zhejiang Province Association of Senior Economists.

Wang Wuzhong Executive Director & Deputy GM Mr. Wang is responsible for environmental protection, safety, daily operation and research and development

of the group and assists the CEO in overall planning. Mr. Wang joined the group in 1992 as director of product

development in the Lin'an thermal power plant of the Jinjiang Group.

Wang Ruihong Executive Director & Deputy GM Mr. Wang is responsible for general administrative management, market branding and legal compliance of the group.

Mr. Wang joined the group in 2014 as Deputy General Manager of Green Energy Hangzhou. He was appointed as a

director of the company in 2010. Mr. Wang has more than 15 years of experience in accounting and corporate finance.

Award Year Authority

National Solid Waste Incineration Plant Ranking: 2016 Ministry of Housing and Urban-Rural Development

"AAA" for Xiaoshan Jinjiang WTE Facility

"AAA" for Hankou Jinjiang WTE Facility

"AAA" for Yunnan Energy WTE Facility

"AA" and "A" for five other facilities of CJE

Green Responsibility Award 2016 World Economic and Environmental Conference

Leading Competitive Integrated Waste Disposal Enterprise 2015 Lu Ying Award Selection Committee

Top 10 Most Influential WTE Enterprises in China 2015 E20 Environment Platform

Environmental Responsibility Award 2015 Environmental Protection Magazine

The Top 10 Largest Investor of WTE PPP Project in PRC 2015 chinabidding.com.cn and paihang360.com

Outstanding Investor of Venous Industrial Park in PRC 2015 chinabidding.com.cn and paihang360.com

The Leading WTE Enterprise in PRC 2013, 2014 & 2015 chinabidding.com.cn and paihang360.com

Innovative Product Award 2015 China Association of Urban Environmental Sanitation

The Most Influential Company in Solid Waste Area 2014 E20 Environment Platform

Gold Prize for Double Shaftless Screw Waste Feeder 2013 Urban Solid Waste Treatment Technology & Equipment International Exhibition

Outstanding Environmental Protection Enterprise of Zhejiang Province 2013 Zhejiang Association of Environment Protection Industry


22

China’s installed WTE capacity at end-2015 and targets for end-2020

Figure 33: Incineration capacity by province

SOURCES: CIMB, NDRC

About circulating fluidized bed and moving grate technology

How does CFB work?

(1) There is a bed of inert material, usually sand, and coal at the bottom of the furnace.

(2) Air is supplied at high pressure from underneath.

(3) Coal is combusted and keeps the inert material in a suspended stage and at a high temperature of 850-950º Celsius.

(4) Waste, which is added from the top, is mixed with the inert material and is burnt completely.

How does moving grate work?

(1) For moving grate, the waste does not need pre-treatment but usually needs to be dried for a few days before burning.

(2) Waste is put into the combustion chamber by a feeder.

(3) The grate allows the waste to be moved within the combustion chamber to allow complete combustion.

(4) Ash is collected via the ash pit under the grate.

2015 2020F Increase

Province ('000 tpd) ('000 tpd) ('000 tpd) % increase CAGR

GD 25.70 90.40 64.70 251.8% 52.1%

Anhui 7.80 32.70 24.90 319.2% 61.2%

Zhejiang 37.00 58.90 21.90 59.2% 16.8%

Jiangsu 36.50 58.00 21.50 58.9% 16.7%

Liaoning 1.80 19.40 17.60 977.8% 120.9%

Hunan 1.60 17.20 15.60 975.0% 120.7%

Beijing 10.40 25.30 14.90 143.3% 34.5%

Chongqing 3.60 17.80 14.20 394.4% 70.4%

Sichuan 9.50 23.70 14.20 149.5% 35.6%

Shandong 19.20 33.30 14.10 73.4% 20.1%

Tianjin 4.80 16.30 11.50 239.6% 50.3%

HLJ 1.80 13.20 11.40 633.3% 94.3%

Henan 4.90 16.00 11.10 226.5% 48.4%

Fujian 15.20 26.50 11.30 74.3% 20.4%

Shanghai 8.30 18.30 10.00 120.5% 30.2%

Jiangxi 0.20 9.80 9.60 4800.0% 265.9%

Hubei 11.50 20.30 8.80 76.5% 20.9%

Xinjiang - 6.30 6.30

Shaanxi 1.50 7.50 6.00 400.0% 71.0%

Shanxi 5.40 11.40 6.00 111.1% 28.3%

Gansu - 6.00 6.00

IM 1.40 7.10 5.70 407.1% 71.8%

Guizhou 2.60 7.80 5.20 200.0% 44.2%

Guangxi 1.50 6.20 4.70 313.3% 60.5%

Jilin 3.80 8.40 4.60 121.1% 30.3%

Hebei 10.70 15.00 4.30 40.2% 11.9%

Yunnan 6.00 9.80 3.80 63.3% 17.8%

Hainan 2.40 5.70 3.30 137.5% 33.4%

Qinghai - 2.20 2.20

Ningxia 0.10 0.90 0.80 800.0% 108.0%

Tibet - - -

Total 235.20 591.40 356.20 151.4% 36.0%


23

Figure 34: CFB technology


Figure 35: Moving grate technology



24

BY THE NUMBERS

SOURCE: CIMB RESEARCH, COMPANY DATA

11.00%

11.56%

12.11%

12.67%

13.22%

13.78%

14.33%

14.89%

15.44%

16.00%

0.900

0.950

1.000

1.050

1.100

1.150

1.200

1.250

1.300

1.350

Jan-13AJan-14AJan-15AJan-16AJan-17FJan-18F

P/BV vs ROE

Rolling P/BV (x) (lhs) ROE (rhs)

9.0%

12.9%

16.8%

20.7%

24.6%

28.4%

32.3%

36.2%

40.1%

44.0%

6.30

6.50

6.70

6.90

7.10

7.30

7.50

7.70

7.90

8.10

Jan-13A Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F

12-mth Fwd FD Normalised P/E vs FD Normalised EPS Growth

12-mth Fwd Rolling FD Normalised P/E (x) (lhs)

Diluted Normalised EPS Growth (rhs)

Profit & Loss

(Rmbm) Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F

Total Net Revenues 1,936 2,632 2,590 3,094 3,033

Gross Profit 819 1,049 1,089 1,323 1,425

Operating EBITDA 698 881 927 1,134 1,220

Depreciation And Amortisation (37) (37) (31) (33) (35)

Operating EBIT 661 844 896 1,101 1,185

Financial Income/(Expense) (122) (156) (168) (260) (335)

Pretax Income/(Loss) from Assoc. 0 0 0 0 0

Non-Operating Income/(Expense) 104 142 213 193 298

Profit Before Tax (pre-EI) 643 830 941 1,033 1,149

Exceptional Items 0 0 0 0 0

Pre-tax Profit 643 830 941 1,033 1,149

Taxation (197) (240) (254) (258) (287)

Exceptional Income - post-tax

Profit After Tax 446 590 687 775 862

Minority Interests (2) 8 9 10 11

Preferred Dividends

FX Gain/(Loss) - post tax

Other Adjustments - post-tax

Preference Dividends (Australia)

Net Profit 444 598 696 785 873

Normalised Net Profit 446 590 687 775 862

Fully Diluted Normalised Profit 444 598 696 785 873

Cash Flow


EBITDA 698.2 881.0 927.4 1,133.9 1,220.2

Cash Flow from Invt. & Assoc. 307.4 421.8 552.6 627.0 846.1

Change In Working Capital (181.7) (585.6) 55.2 (445.2) (295.7)

(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow (54.6) (65.9) (38.8) (57.2) (71.8)

Net Interest (Paid)/Received (128.6) (168.6) (195.4) (295.6) (364.3)

Tax Paid (131.5) (159.4) (260.0) (260.0) (270.0)

Cashflow From Operations 509.2 323.3 1,040.9 702.8 1,064.5

Capex (920.0) (795.7) (2,540.0) (2,780.0) (630.0)

Disposals Of FAs/subsidiaries 0.0 0.2 0.0 0.0 0.0

Acq. Of Subsidiaries/investments (35.0) (508.4) 0.0 0.0 0.0

Other Investing Cashflow (23.5) (86.8) 307.8 (13.8) (14.5)

Cash Flow From Investing (978.4) (1,390.8) (2,232.2) (2,793.8) (644.5)

Debt Raised/(repaid) 467.7 18.7 1,100.0 2,400.0 0.0

Proceeds From Issue Of Shares 0.0 963.6 0.0 0.0 0.0

Shares Repurchased 0.0 0.0 0.0 0.0 0.0

Dividends Paid (15.1) (1.7) (298.8) (348.1) (235.5)

Preferred Dividends

Other Financing Cashflow 163.4 483.0 90.5 99.5 109.5

Cash Flow From Financing 616.0 1,463.6 891.7 2,151.5 (126.0)

Total Cash Generated 146.8 396.2 (299.6) 60.5 293.9

Free Cashflow To Equity (1.6) (1,048.7) (91.3) 309.0 420.0

Free Cashflow To Firm (338.7) (895.4) (992.1) (1,794.4) 787.2

We expect pretax earnings CAGR for FY17-19F to outpace revenue growth as the low-margin non-core businesses drop.

We expect capex to surge in FY17F and FY18F.


25

BY THE NUMBERS… cont’d

SOURCE: CIMB RESEARCH, COMPANY DATA

Balance Sheet


Total Cash And Equivalents 381 541 241 302 596

Total Debtors 438 680 697 880 982

Inventories 38 42 57 78 71

Total Other Current Assets 389 546 221 232 232

Total Current Assets 1,246 1,809 1,216 1,492 1,881

Fixed Assets 4,943 5,526 7,752 10,125 10,234

Total Investments 44 44 44 44 44

Intangible Assets 1,007 1,551 1,542 2,040 1,966

Total Other Non-Current Assets 525 801 891 1,206 1,323

Total Non-current Assets 6,518 7,921 10,229 13,415 13,567

Short-term Debt 534 990 1,038 1,758 1,758

Current Portion of Long-Term Debt

Total Creditors 671 930 1,056 1,571 1,338

Other Current Liabilities 456 781 800 828 878

Total Current Liabilities 1,661 2,701 2,895 4,157 3,973

Total Long-term Debt 1,806 1,370 2,422 4,102 4,102

Hybrid Debt - Debt Component

Total Other Non-Current Liabilities 0 0 0 0 0

Total Non-current Liabilities 1,806 1,370 2,422 4,102 4,102

Total Provisions 802 1,068 1,132 1,204 1,281

Total Liabilities 4,269 5,139 6,448 9,462 9,356

Shareholders' Equity 3,311 4,423 4,820 5,257 5,894

Minority Interests 184 169 177 188 199

Total Equity 3,495 4,591 4,998 5,445 6,093

Key Ratios

Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F

Revenue Growth 52.5% 35.9% (1.6%) 19.5% (1.9%)

Operating EBITDA Growth 33.6% 26.2% 5.3% 22.3% 7.6%

Operating EBITDA Margin 36.1% 33.5% 35.8% 36.7% 40.2%

Net Cash Per Share (Rmb) (1.61) (1.49) (2.64) (4.57) (4.33)

BVPS (Rmb) 2.72 3.63 3.96 4.32 4.84

Gross Interest Cover 5.33 5.28 5.23 4.22 3.51

Effective Tax Rate 30.7% 28.9% 27.0% 25.0% 25.0%

Net Dividend Payout Ratio NA 50.0% 50.0% 30.0% 30.0%

Accounts Receivables Days 85.2 77.7 97.0 93.0 112.0

Inventory Days 13.31 9.32 12.08 13.98 16.97

Accounts Payables Days 215.6 185.2 241.6 270.8 330.0

ROIC (%) 10.0% 10.2% 9.0% 8.9% 7.3%

ROCE (%) 11.2% 11.6% 10.2% 10.0% 9.2%

Return On Average Assets 7.50% 8.08% 7.68% 7.36% 7.33%

Key Drivers

Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F

Solid Waste Capacity ('000t/day) 23.3 24.8 30.3 39.2 46.3

Solid waste est. capacity util. (%) 81.8% 90.0% 89.8% 85.7% 84.8%

Wastewater capacity (m cu m/day) N/A N/A N/A N/A N/A

Wastewater est. capacity util. (%) N/A N/A N/A N/A N/A

We expect ROIC to drop in FY17-19F as BOT construction earnings and earnings from EMC services drop.

We expect total debt to rise in FY17F as the construction for projects on hand starts.

Capacity expansion will be the major growth driver, in our view.


26

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The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. Information barriers and other arrangements may be established where necessary to prevent conflicts of interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request.

Reports relating to a specific geographical area are produced by the corresponding CIMB entity as listed in the table below. The term “CIMB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case, CIMB Group Holdings Berhad ("CIMBGH") and its affiliates, subsidiaries and related companies.

Country CIMB Entity Regulated by

Hong Kong CIMB Securities Limited Securities and Futures Commission Hong Kong

India CIMB Securities (India) Private Limited Securities and Exchange Board of India (SEBI)

Indonesia PT CIMB Securities Indonesia Financial Services Authority of Indonesia

Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia

Singapore CIMB Research Pte. Ltd. Monetary Authority of Singapore

South Korea CIMB Securities Limited, Korea Branch Financial Services Commission and Financial Supervisory Service

Taiwan CIMB Securities Limited, Taiwan Branch Financial Supervisory Commission

Thailand CIMB Securities (Thailand) Co. Ltd. Securities and Exchange Commission Thailand


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(i) As of March 21, 2017 CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:

(a) Beijing Enterprises Water, China Everbright Water, CITIC Envirotech

(ii) As of March 21, 2017, the analyst(s) who prepared this report, and the associate(s), has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:

(a) -

This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.

This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments or any derivative instrument, or any rights pertaining thereto.

Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report.

The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.

Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Securities (Singapore) Pte. Ltd. and CIMB Securities Limited. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cth) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. You represent and warrant that if you are in Australia, you are a “wholesale client”. This research is of a general nature only and has been prepared without taking into account the objectives, financial situation or needs of the individual recipient. CIMB Securities (Singapore) Pte. Ltd. and CIMB Securities Limited do not hold, and are not required to hold an Australian financial services licence. CIMB Securities (Singapore) Pte. Ltd. and CIMB Securities Limited rely on “passporting” exemptions for entities appropriately licensed by the Monetary Authority of Singapore (under ASIC Class Order 03/1102) and the Securities and Futures Commission in Hong Kong (under ASIC Class Order 03/1103).

Canada: This research report has not been prepared in accordance with the disclosure requirements of Dealer Member Rule 3400 – Research Restrictions and Disclosure Requirements of the Investment Industry Regulatory Organization of Canada. For any research report distributed by CIBC, further disclosures related to CIBC conflicts of interest can be found at https://researchcentral.cibcwm.com .

China: For the purpose of this report, the People’s Republic of China (“PRC”) does not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region or Taiwan. The distributor of this report has not been approved or licensed by the China Securities Regulatory Commission or any other relevant regulatory authority or governmental agency in the PRC. This report contains only marketing information. The distribution of this report is not an offer to buy or sell to any person within or outside PRC or a solicitation to any person within or outside of PRC to buy or sell any instruments described herein. This report is being issued outside the PRC to a limited number of institutional investors and may not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose.

France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument.

Germany: This report is only directed at persons who are professional investors as defined in sec 31a(2) of the German Securities Trading Act (WpHG). This publication constitutes research of a non-binding nature on the market situation and the investment instruments cited here at the time of the publication of the information.

The current prices/yields in this issue are based upon closing prices from Bloomberg as of the day preceding publication. Please note that neither the German Federal Financial Supervisory Agency (BaFin), nor any other supervisory authority exercises any control over the content of this report.

Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB Securities Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CHK.

CIMB Securities Limited does not make a market on other securities mentioned in the report.

None of the analyst(s) or the associates serve as an officer of the listed corporation mentioned in this report.

CIMB does not have an officer serving in any of the listed corporation mentioned in this report

CIMB does not receive any compensation or other benefits from any of the listed corporation mentioned, relating to the production of research reports.

India: This report is issued and distributed in India by CIMB Securities (India) Private Limited (”CIMB India") which is registered with SEBI as a stock-broker under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, the Securities and Exchange Board of India (Research Analyst) Regulations, 2014 (SEBI Registration Number INH000000669) and in accordance with the


28

provisions of Regulation 4 (g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CIMB India is not required to seek registration with SEBI as an Investment Adviser.

The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from equity stock broking and merchant banking of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates.”

Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (“CIMBI”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesian residents except in compliance with applicable Indonesian capital market laws and regulations.

This research report is not an offer of securities in Indonesia. The securities referred to in this research report have not been registered with the Financial Services Authority (Otoritas Jasa Keuangan) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstances which constitute an offer within the meaning of the Indonesian capital market law and regulations.

Ireland: CIMB is not an investment firm authorised in the Republic of Ireland and no part of this document should be construed as CIMB acting as, or otherwise claiming or representing to be, an investment firm authorised in the Republic of Ireland.

Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”) solely for the benefit of and for the exclusive use of our clients. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update, revise or reaffirm its opinion or the information in this research reports after the date of this report.

New Zealand: In New Zealand, this report is for distribution only to persons who are wholesale clients pursuant to section 5C of the Financial Advisers Act 2008.

Singapore: This report is issued and distributed by CIMB Research Pte Ltd (“CIMBR”). CIMBR is a financial adviser licensed under the Financial Advisers Act, Cap 110 (“FAA”) for advising on investment products, by issuing or promulgating research analyses or research reports, whether in electronic, print or other form. Accordingly CIMBR is a subject to the applicable rules under the FAA unless it is able to avail itself to any prescribed exemptions.

Recipients of this report are to contact CIMB Research Pte Ltd, 50 Raffles Place, #19-00 Singapore Land Tower, Singapore in respect of any matters arising from, or in connection with this report. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If you have not been sent this report by CIMBR directly, you may not rely, use or disclose to anyone else this report or its contents.

If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. If the recipient is an accredited investor, expert investor or institutional investor, the recipient is deemed to acknowledge that CIMBR is exempt from certain requirements under the FAA and its attendant regulations, and as such, is exempt from complying with the following : (a) Section 25 of the FAA (obligation to disclose product information); (b) Section 27 (duty not to make recommendation with respect to any investment product without having a reasonable basis where you may be reasonably expected to rely on the recommendation) of the FAA; (c) MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03]; (d) MAS Notice on Recommendation on Investment Products [Notice No. FAA-N16]; (e) Section 36 (obligation on disclosure of interest in securities), and (f) any other laws, regulations, notices, directive, guidelines, circulars and practice notes which are relates to the above, to the extent permitted by applicable laws, as may be amended from time to time, and any other laws, regulations, notices, directive, guidelines, circulars, and practice notes as we may notify you from time to time. In addition, the recipient who is an accredited investor, expert investor or institutional investor acknowledges that a CIMBR is exempt from Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA.

CIMB Research Pte Ltd ("CIMBR"), its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMBR, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.

As of March 21, 2017, CIMBR does not have a proprietary position in the recommended securities in this report.

CIMB Securities Singapore Pte Ltd and/or CIMB Bank does not make a market on other securities mentioned in the report.

South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch (“CIMB Korea”) which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. In South Korea, this report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea


29

(“FSCMA”).

Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any investment decision. This document does not constitute a public offering of securities.

CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services.

Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.

Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of banks issued by the Swiss Bankers’ Association (Directives on the Independence of Financial Research).

Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer or a placement within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China.

Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (“CIMBS”) based upon sources believed to be reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CIMBS has no obligation to update its opinion or the information in this research report.

If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient are unaffected.

CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions.

AAV, ADVANC, AMATA, AOT, AP, BA, BANPU, BBL, BCH, BCP, BDMS, BEAUTY, BEC, BEM, BH, BIG, BLA, BLAND, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DELTA, DTAC, EGCO, EPG, GLOBAL, GLOW, GPSC, GUNKUL, HANA, HMPRO, ICHI, IFEC, INTUCH, IRPC, ITD, IVL, KAMART, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, MAJOR, MINT, MTLS, PLANB, PSH, PTG, PTT, PTTEP, PTTGC, QH, ROBINS, RS, S, SAMART, SAWAD, SCB, SCC, SCN, SGP, SIRI, SPALI, SPCG, SPRC, STEC, STPI, SUPER, TASCO, TCAP, THAI, THANI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TRUE, TTA, TTCL, TTW, TU, TVO, UNIQ, VGI, VIBHA, VNG, WHA.

Corporate Governance Report:

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.

The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result

Description: Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.

United Kingdom: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorized and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X7YB. Unless specified to the contrary, this report has been issued and approved for distribution in the U.K. and the EEA by CIMB UK. Investment research issued by CIMB UK has been prepared in accordance with CIMB Group’s policies for managing conflicts of interest arising as a result of publication and distribution of investment research. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (c) fall within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom subject to relevant regulation in each jurisdiction, or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons.

Where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent “investment research” under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment


30

research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. Any such non-independent report must be considered as a marketing communication.

United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S. registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as “U.S. Institutional Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.

CIMB Securities (USA) Inc does not make a market on other securities mentioned in the report.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Spitzer Chart for stock being researched ( 2 year data )

China Jinjiang (CJE SP)

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2016, Anti-Corruption 2016.

AAV – Very Good, n/a, ADVANC – Very Good, Certified, AEONTS – Good, n/a, AMATA – Excellent, Declared, ANAN – Very Good, Declared, AOT – Excellent, Declared, AP – Very Good, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Very Good, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – not available, Declared, BCP - Excellent, Certified, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, Declared, BEC - Good, n/a, BH - Good, Declared, BIGC - Excellent, Declared, BJC – Good, n/a, BLA – Very Good, Certified, BPP – not available, n/a, BTS - Excellent, Certified, CBG – Good, n/a, CCET – not available, n/a, CENTEL – Very Good, Certified, CHG – Very Good, n/a, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, Declared, DEMCO – Excellent, Certified, DTAC – Excellent, Certified, EA – Very Good, Declared, ECL – Good, Certified, EGCO - Excellent, Certified, EPG – Good, n/a, GFPT - Excellent, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Very Good, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Declared, ICHI – Very Good, Declared, INTUCH - Excellent, Certified, ITD – Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Declared, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Declared, M – Very Good, Declared, MAJOR - Good, n/a, MAKRO – Good, Declared, MALEE – Very Good, Declared, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Declared, MEGA – Very Good, Declared, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Very Good, Declared, PSH – not available, n/a, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Declared, RATCH – Excellent, Certified, ROBINS – Very Good, Declared, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI - Good, n/a, SPALI - Excellent, Declared, SPRC – Very Good, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, Declared, TCAP – Excellent, Certified, THAI – Very Good, Declared, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Very Good, Certified, TICON – Very Good, Declared, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Good, n/a, TMB - Excellent, Certified, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Very

Rating Distribution (%) Investment Banking clients (%)

Add 58.4% 5.4%

Hold 29.6% 1.4%

Reduce 11.6% 0.4%

Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2016

1626 companies under coverage for quarter ended on 31 December 2016

0.700

0.750

0.800

0.850

0.900

0.950

1.000

Aug-16 Sep-16 Oct-16 Nov-16 Jan-17 Feb-17

Price Close


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Good, Declared, TTW – Very Good, Declared, TU – Excellent, Declared, UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a.

Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into: - Companies that have declared their intention to join CAC, and - Companies certified by CAC

CIMB Recommendation Framework

Stock Ratings Definition:

Add The stock’s total return is expected to exceed 10% over the next 12 months.

Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition:

Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.

Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.

Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition:

Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.

Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.

Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

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