China / Hong Kong Company Guide

China Everbright Water

Version 8 | Bloomberg: CEWL SP Equity | Reuters: CEWL.SI
Refer to important disclosures at the end of this report

DBS Group Research . Equity 24 Feb 2017

BUY Exploring new business areas

Last Traded Price ( 24 Feb 2017):S$0.435 (STI : 3,117)
Price Target 12-mth: S$0.64 (47% upside)
Potential Catalyst: New project wins
Where we differ: We use adjusted PE (stripping out construction
revenue) to derive TP
Analyst
Patricia YEUNG +852 2863 8908 ; patricia_yeung@dbs.com
What’s New
 FY16 net profit below our expectation by 13% due
to lower revenue and higher expenses
 Secured 12 new projects with total investment of
Rmb2.5bn
 New business areas as new growth drivers
 Maintain BUY with TP of S$0.64
Price Relative
S$
1.6
Earnings rebound. We maintain our BUY rating on China Everbright
Water (CEW) despite its disappointing FY16 results. The company is
progressing well in securing public–private partnership (PPP) projects
and exploring new business areas. The stronger order backlog will also
lead to a rebound in FY17 earnings.
FY16 results below expectations. FY16 net profit drop of 15% to
HK$349m was below our expectation by 13%, with discrepancies
stemming from the lower-than-expected construction revenue and
higher-than-expected expenses (including interest expense and
administration cost). Effective interest rate climbed from 3.8% to 4.2%.
On a positive note, trade receivable days shortened, implying an
improvement in settlement from customers. Volume of treated water
increased 28% to 1.14bn m³ which was higher than our estimate.
Despite cash outflow for construction, CEW’s net debt-equity ratio
remained stable at 42%. A final dividend of S$0.0037 was declared, up
from S$0.0035 in FY15, despite a drop in earnings.
Relative Index

1.4
321 Strong order backlog for FY17. Apart from the traditional wastewater
1.2
271 treatment projects, CEW is exploring new business areas, including
1.0
221 integrated services, watershed management, sponge city, etc. Having
0.8 171
secured 12 new projects with a total investment of Rmb2.5bn, CEW
0.6 121
has a strong order backlog. In particular, most of the construction work
0.4
Feb-13 Feb-14 Feb-15 Feb-16
71
Feb-17 of Zhenjiang Sponge City (total investment of Rmb1.39bn) will be
China Everbright Water (LHS) Relative STI (RHS) completed within FY17, coupled with at least six waste treatment
plants (with total investment of c.Rmb600m) under construction, we
Forecasts and Valuation
FY Dec (HK$ m) 2015A 2016A 2017F 2018F expect construction revenue to jump by 25-35% in FY17/18. In
Turnover 1,815 2,494 2,994 3,522 addition, seven projects will commence operations in FY17 which
EBITDA 786 836 1,059 1,222 should bring a high single-digit growth in operation services. Coupled
Pre-tax Profit 596 537 706 832
Net Profit 406 349 473 558 with the absence of forex loss (HK$49m in FY16), we project
Net Pft (Pre Ex) (core profit) 406 349 473 558 35%/18% earnings growth in FY17/18.
Net Profit Gth (Pre-ex) (%) 38.7 (14.0) 35.3 18.0
EPS (HK$) 0.16 0.13 0.18 0.21 Valuation:
EPS (S$) 0.03 0.02 0.03 0.04
EPS Gth (%) 34.2 (15.2) 35.1 18.0
To reflect the disappointment in construction revenue in FY16 results,
Diluted EPS (S$) 0.03 0.02 0.03 0.04 we have revised down our FY17-18F earnings by 16-23%. However,
DPS (S$) 0.00 0.00 0.00 0.00 our TP remains unchanged at S$0.64 as it is based on 24x 12-month
BV Per Share (S$) 0.49 0.47 0.50 0.54 rolling adjusted PE which has stripped out construction revenue.
PE (X) 15.2 17.9 13.3 11.2
P/Cash Flow (X) 189.3 309.7 nm nm Key Risks to Our View:
P/Free CF (X) 275.5 753.7 nm nm We have assumed CEW will add at least 1m tons of capacity through
EV/EBITDA (X) 12.0 11.5 10.8 10.7
Net Div Yield (%) 0.1 0.2 0.2 0.2 acquisitions. Delay in M&A would result in slower-than-expected
P/Book Value (X) 0.9 0.9 0.9 0.8 earnings growth.
Net Debt/Equity (X) 0.4 0.4 0.6 0.8
ROAE (%) 5.8 5.0 6.7 7.4 At A Glance
Issued Capital (m shrs) 2,610
Earnings Rev (%): (23) (16)
Consensus EPS (HK$) 0.21 0.24 Mkt. Cap (S$m/US$m) 1,135 / 807
Other Broker Recs: B: 5 S: 0 H: 1 Major Shareholders
Source of all data on this page: Company, DBSV, Thomson Reuters, China Everbright International (%) 74.3
HKEX Free Float (%) 25.7
3m Avg. Daily Val. (US$m) 0.5
ICB Industry : Utilities / Gas, Water & Multiutilities

ASIAN INSIGHTS VICKERS SECURITIES

ed-TH / sa- AH
Company Guide
China Everbright Water

addition, CEW is also looking for opportunities in the

Strategies for FY17
Exploring new business areas. Having achieved breakthrough
in new business areas, i.e. sponge city and ecological
restoration work, CEW has now built up a track record to
facilitate more deal flow. In fact, management expects
increased demand for integrated services and environmental
services for rural areas. In particular, the issue of black and
stinky water bodies is very serious. Demand for integrated
services, i.e. river water quality improvement, river dredging,
river outfall remediation, etc., will be strong. Thus, the recent
win of Nanjing Municipal PPP project will be a showcase for
CEW to secure similar deals.
Expansion of project portfolio. With a project portfolio of
>5m tons of daily treatment capacity, management aims to
reach 10m tons by 2020. Apart from organic growth and
project extension, the above target can also be achieved
through acquisitions. Its M&A candidate will not be limited to
private enterprises, but also assets from governments. In
overseas market.
Technology advancement to enhance core competitiveness.
Through collaboration with academic institutions, CEW will
strengthen its technology competitiveness with a focus on
research of applied technologies. Key R&D areas include
sponge city construction, river-basin restoration, industrial
wastewater treatment, etc.
New investment and financing models. While bank
borrowings remain the main financing method, CEW is also
exploring other channels, such as issuing panda bonds and
setting up water industry funds. These new financing
channels will be more suitable for large-scale projects. In fact,
an industry fund is expected to be set up in 1HFY17. It has an
investment amount of Rmb10bn which can finance projects
with total investment of Rmb30bn.

Income Statement (HK$ m)

FY Dec 2015A 2016A % chg yoy
Revenue 1,815 2,494 37.4
Cost of Goods Sold (1,001) (1,588) 58.7
Gross Profit 814 906 11.2
Other Opng (Exp)/Inc (100) (171) 70.6
Operating Profit 714 735 2.9
Other Non Opg (Exp)/Inc 0 0 nm
Associates & JV Inc 0 0 nm
Net Interest (Exp)/Inc (118) (198) (67.2)
Exceptional Gain/(Loss) 0 0 nm
Pre-tax Profit 596 537 (9.9)
Tax (172) (165) (4.4)
Minority Interest (17) (23) (33.1)
Net Profit 406 349 (14.0)
Net Profit before Except. 406 349 (14.0)

Margins & Ratio

Gross Margins (%) 44.9 36.3
Opg Profit Margin (%) 39.4 29.5
Net Profit Margin (%) 22.4 14.0

Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

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 Company Guide
China Everbright Water

CRITICAL DATA POINTS TO WATCH Total operating capacity (m tons)

6
Earnings Drivers: 5.04
5
Tariff hikes. During FY16, a number of water plants enjoyed 4.34
4
tariff increases, ranging from 9% to 56%. The tariff hikes
were a result of upgrading, expansion and increase in 3

operating expenses. Currently, around 20% of CEW’s water 2

plants (excluding Dalian Dongda) are operating at Grade 1B 1
standard and will be required to be upgraded to Grade 1A.
0
Thus, water tariff uptrend will continue. 2017F 2018F
 
Improvement in utilisation. Average utilisation of water plants Volume of waste water treated (m tons)
at HanKore and Dalian Dongda are about 70% and 87% 1600
respectively, which are lower than 93% achieved by China 1400
1,427
1,297
Everbright International (CEI)’s water plants. Improvement in 1200
utilisation will be achieved by upgrading facilities and 1000
treatment standards, increasing sewage treatment volume, 800

improving pipeline connectivity, etc. 600

400

M&A strategy. With a current capacity of c.5m tons per day 200

and a capacity target of 10m tons per day by 2020, CEW 0

2017F 2018F
continues to look for M&A candidates which include private  
enterprises and water plants from local governments. Project Treatment tariff (Rmb/ton)
extension, coupled with improving utilisation of the existing
2 1.49
plants, should grow treatment volume by 5-10% each year. 1.44
1

1
Expanding along the value chain. For the longer term, CEW 1
has to expand even further along the value chain in order to 1
provide a more comprehensive range of services. These 1
include not just water supply, but also recycled water, water 0

desalination, integrated watershed management, 0

construction of sponge cities, etc. 0

2017F 2018F
 
Source: Company, DBS Vickers

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Company Guide
China Everbright Water

Leverage & Asset Turnover (x)

0.3
Balance Sheet: 0.90

Strong balance sheet. CEW’s net debt-equity ratio was 42% as 0.80

at end-2016. We expect the ratio to climb further to 62% by 0.70 0.3

0.60
end-FY17. While CEW is exploring new financing channels (such 0.50 0.2
as development funds for water equity), we should not rule out 0.40
the possibility of an equity fund-raising exercise. 0.30
0.2
0.20
0.10
0.00 0.1
Share Price Drivers: 2014A 2015A 2016A 2017F 2018F

M&A. Given that M&A is a major growth driver for CEW, a Gross Debt to Equity (LHS) Asset Turnover (RHS)

Capital Expenditure
successful acquisition of a sizeable water company will be a HK$m
strong share price catalyst. 350.0

300.0

Supportive government policy. The release of The Water Ten 250.0

Plan in April 2015 triggered the environmental services sector to 200.0

rally with a higher-than-expected investment amount. Additional 150.0

favourable government policy can stimulate the share price. 100.0

50.0

0.0
2014A 2015A 2016A 2017F 2018F

Key Risks: Capital Expenditure (-)

Keen competition. More new players have entered the market ROE
through acquisitions. 7.0%

6.0%

Project delay. Delays in project development will result in slower 5.0%

growth in earnings. 4.0%

3.0%

2.0%
Company Background:
China Everbright Water (CEW), previously named HanKore, was 1.0%

formed after China Everbright International (CEI) injected all of 0.0%

2014A 2015A 2016A 2017F 2018F
its water assets into HanKore, to become the largest shareholder.
Forward PE Band
CEW is now CEI's sole investment arm in water operations with (x)
5m tons of daily capacity under its project portfolio. 76.5

66.5

56.5 +2sd: 56.5x

46.5
+1sd: 44.2x
36.5
Avg: 31.9x
26.5
‐1sd: 19.6x
16.5

6.5 ‐2sd: 7.3x
Feb-13 Feb-14 Feb-15 Feb-16

PB Band
(x)
10.6

8.6

6.6 +2sd: 6.7x

4.6 +1sd: 4.61x

2.6 Avg: 2.52x

0.6 ‐1sd: 0.43x
Dec-13 Dec-14 Dec-15 Dec-16
-1.4

Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

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 Company Guide
China Everbright Water

Key Assumptions
FY Dec 2017F 2018F
Total operating capacity
4.3 5.0
(m tons)
Volume of waste water
1,297.2 1,427.0
treated (m tons)
Treatment tariff
1.4 1.5
(Rmb/ton)
Source: Company, DBS Vickers

Segmental Breakdown (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F
Revenues (HK$ m)
Construction services 107 586 1,128 1,526 1,924
Operation services 625 753 818 888 962
Finance income 311 468 539 571 627
Others 9 8 8 9 9
Total 1,051 1,815 2,494 2,994 3,522
Source: Company, DBS Vickers

Income Statement (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F
Revenue 1,051 1,815 2,494 2,994 3,522
Cost of Goods Sold (463) (1,001) (1,588) (1,926) (2,304)
Gross Profit 587 814 906 1,068 1,218
Other Opng (Exp)/Inc (64) (100) (171) (131) (140)
Operating Profit 523 714 735 936 1,078
Other Non Opg (Exp)/Inc 0 0 0 0 0
Associates & JV Inc 0 0 0 0 0
Net Interest (Exp)/Inc (90) (118) (198) (231) (246)
Dividend Income 0 0 0 0 0
Exceptional Gain/(Loss) 0 0 0 0 0
Pre-tax Profit 433 596 537 706 832
Tax (119) (172) (165) (208) (245)
Minority Interest (21) (17) (23) (25) (29)
Preference Dividend 0 0 0 0 0
Net Profit 293 406 349 473 558
Net Profit before Except. 293 406 349 473 558
EBITDA 547 786 836 1,059 1,222
Growth
Revenue Gth (%) (18.6) 72.7 37.4 20.0 17.6
EBITDA Gth (%) 11.5 43.6 6.4 26.6 15.4
Opg Profit Gth (%) 10.4 36.6 2.9 27.4 15.1
Net Profit Gth (%) 9.9 38.7 (14.0) 35.3 18.0
Margins & Ratio
Gross Margins (%) 55.9 44.9 36.3 35.7 34.6
Opg Profit Margin (%) 49.8 39.4 29.5 31.3 30.6
Net Profit Margin (%) 27.9 22.4 14.0 15.8 15.8
ROAE (%) 4.6 5.8 5.0 6.7 7.4
ROA (%) 2.9 2.9 2.5 3.2 3.3
ROCE (%) 4.0 3.8 3.8 4.8 4.9
Div Payout Ratio (%) 0.0 2.2 2.8 2.0 2.0
Net Interest Cover (x) 5.8 6.0 3.7 4.1 4.4
Source: Company, DBS Vickers

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Company Guide
China Everbright Water

Interim Income Statement (HK$ m)

FY Dec 2H2014 1H2015 2H2015 1H2016 2H2016

Revenue 545 946 869 1,326 1,168

Cost of Goods Sold (258) (503) (488) (862) (727)
Gross Profit 287 443 381 464 442
Other Oper. (Exp)/Inc (46) (69) (41) (80) (90)
Operating Profit 241 374 340 384 351
Other Non Opg (Exp)/Inc 0 0 0 0 0
Associates & JV Inc 0 0 0 0 0
Net Interest (Exp)/Inc (56) (70) (48) (96) (102)
Exceptional Gain/(Loss) 0 0 0 0 0
Pre-tax Profit 186 304 292 288 250
Tax (50) (83) (89) (100) (65)
Minority Interest (9) (9) (8) (7) (16)
Net Profit 127 211 195 181 169
Net profit bef Except. 127 211 195 181 169
Growth
Revenue Gth (%) N/A 87.1 59.5 40.1 34.4
Opg Profit Gth (%) N/A 32.8 41.0 2.5 3.4
Net Profit Gth (%) N/A 27.3 53.7 (14.5) (13.5)
Margins
Gross Margins (%) 52.7 46.8 43.8 35.0 37.8
Opg Profit Margins (%) 44.3 39.6 39.1 28.9 30.1
Net Profit Margins (%) 23.3 22.3 22.4 13.6 14.4
Source: Company, DBS Vickers

Quarterly Income Statement (HK$ m)

FY Dec 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016

Revenue 459 657 669 553 615

Cost of Goods Sold (269) (421) (441) (331) (396)
Gross Profit 190 236 228 223 219
Other Oper. (Exp)/Inc 1 (37) (43) (26) (64)
Operating Profit 191 199 185 197 154
Other Non Opg (Exp)/Inc 0 0 0 0 0
Associates & JV Inc 0 0 0 0 0
Net Interest (Exp)/Inc (33) (45) (50) (56) (46)
Exceptional Gain/(Loss) 0 0 0 0 0
Pre-tax Profit 157 154 134 141 109
Tax (46) (47) (53) (43) (22)
Minority Interest (5) (3) (4) (7) (9)
Net Profit 106 103 78 91 77
Net profit bef Except. 106 103 78 91 77
EBITDA 24 24 23 24 31
Growth (QoQ)
Revenue Gth (%) 11.9 43.2 1.7 (17.2) 11.1
EBITDA Gth (%) 0.0 55.2 (5.0) 4.3 30.9
Opg Profit Gth (%) 27.7 4.3 (7.2) 6.7 (21.6)
Net Profit Gth (%) 19.5 (2.9) (24.8) 17.5 (15.0)
Growth (YoY)
Revenue Gth (%) N/A 50.6 31.1 34.9 34.0
EBITDA Gth (%) N/A (88.0) 20.7 53.8 101.4
Opg Profit Gth (%) N/A 10.0 (4.5) 31.9 (19.0)
Net Profit Gth (%) N/A 2.2 (29.8) 2.6 (27.0)
Margins
Gross Margins (%) 41.4 36.0 34.1 40.2 35.6
Opg Profit Margins (%) 41.6 30.3 27.6 35.6 25.1
Net Profit Margins (%) 23.1 15.7 11.6 16.5 12.6
Source: Company, DBS Vickers

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China Everbright Water

Balance Sheet (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F

Net Fixed Assets 174 163 148 431 661

Invts in Associates & JVs 0 0 1 2 2
Other LT Assets 8,229 10,462 10,635 12,428 14,189
Cash & ST Invts 681 1,769 1,903 1,048 880
Inventory 29 11 14 60 70
Debtors 998 1,535 1,380 1,596 1,905
Other Current Assets 0 0 0 90 106
Total Assets 10,112 13,939 14,081 15,654 17,813

ST Debt 763 2,395 1,521 1,571 1,605

Creditors 600 475 937 1,125 1,323
Other Current Liab 43 52 13 13 13
LT Debt 1,062 2,424 3,366 4,225 5,621
Other LT Liabilities 1,093 1,296 1,052 1,052 1,052
Shareholder’s Equity 6,325 7,061 6,798 7,250 7,751
Minority Interests 226 236 394 419 447
Total Cap. & Liab. 10,112 13,939 14,081 15,654 17,813

Non-Cash Wkg. Capital 385 1,018 444 607 745

Net Cash/(Debt) (1,143) (3,049) (2,985) (4,748) (6,346)
Debtors Turn (avg days) 346.8 308.6 213.3 181.4 181.4
Creditors Turn (avg days) 498.5 186.8 173.4 208.6 206.9
Inventory Turn (avg days) 24.0 4.2 3.1 7.5 11.0
Asset Turnover (x) 0.1 0.1 0.2 0.2 0.2
Current Ratio (x) 1.2 1.1 1.3 1.0 1.0
Quick Ratio (x) 1.2 1.1 1.3 1.0 0.9
Net Debt/Equity (X) 0.2 0.4 0.4 0.6 0.8
Net Debt/Equity ex MI (X) 0.2 0.4 0.4 0.7 0.8
Capex to Debt (%) 0.2 0.2 0.2 5.2 3.5
Z-Score (X) NA NA NA NA NA
Source: Company, DBS Vickers

Cash Flow Statement (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F

Pre-Tax Profit 433 596 537 706 832

Dep. & Amort. 24 72 101 123 144
Tax Paid (65) (95) (134) (208) (245)
Assoc. & JV Inc/(loss) 0 0 0 0 0
(Pft)/ Loss on disposal of FAs 0 0 0 0 0
Chg in Wkg.Cap. (173) (635) (642) (1,493) (1,456)
Other Operating CF 98 95 157 231 246
Net Operating CF 317 33 20 (642) (480)
Capital Exp.(net) (3) (10) (12) (300) (250)
Other Invts.(net) 431 (2,163) (1) 0 0
Invts in Assoc. & JV 1 0 0 0 0
Div from Assoc & JV 0 0 0 0 0
Other Investing CF 2 (4) 7 (570) (565)
Net Investing CF 430 (2,177) (6) (870) (815)
Div Paid 0 0 0 (21) (56)
Chg in Gross Debt 33 3,389 310 1,452 1,430
Capital Issues 0 659 (23) 0 0
Other Financing CF (521) (1,094) (145) (231) (246)
Net Financing CF (488) 2,954 142 1,200 1,128
Currency Adjustments (6) (20) (85) 0 0
Chg in Cash 252 789 71 (311) (167)
Opg CFPS (HK$) 0.20 0.26 0.25 0.33 0.37
Free CFPS (HK$) 0.13 0.01 0.00 (0.36) (0.28)

Source: Company, DBS Vickers

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 Company Guide
China Everbright Water

Target Price & Ratings History

S.No . Da te Cl o s i n g Ta rg e t R a ti n g
S$
Pri c e Pri c e
0.80 10
2 5 67 9 11 12 13 1: 16-Feb-16 S$0.425 S$0.58 Buy
0.70 8 2: 17-Feb-16 S$0.44 S$0.58 Buy
3&4
3: 22-Feb-16 S$0.475 S$0.64 Buy
0.60
4: 22-Feb-16 S$0.475 S$0.64 Buy
0.50 1 5: 3-Mar-16 S$0.50 S$0.64 Buy
0.40 6: 12-Apr-16 S$0.545 S$0.64 Buy
7: 19-Apr-16 S$0.63 S$0.69 Buy
0.30 8: 20-Apr-16 S$0.63 S$0.69 Buy
0.20 9: 16-May-16 S$0.67 S$0.69 Buy
10: 18-May-16 S$0.675 S$0.69 Buy
0.10
11: 10-Jun-16 S$0.66 S$0.69 Buy
Mar-16

Apr-16

Sep-16

Jan-17
Jun-16

Aug-16

Dec-16
Jul-16
May-16
Feb-16

Oct-16

Nov-16

Feb-17
12: 9-Aug-16 S$0.60 S$0.66 Buy
13: 3-Nov-16 S$0.545 S$0.64 Buy

Source: DBS Vickers

Analyst: Patricia YEUNG

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 Company Guide
China Everbright Water

DBSVHK recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

Completed Date: 24 Feb 2017 18:51:44 (HKT)

Dissemination Date: 24 Feb 2017 19:03:24 (HKT)

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Vickers (Hong Kong) Limited (“DBSVHK”). This report is solely intended for the clients of DBS Bank Ltd., DBS Vickers
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document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVHK.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd.,
DBSVS and DBSVHK, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents
(collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are
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Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no
assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The
information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain
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This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the
valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore,
the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation
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(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b)there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments
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Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

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not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months
and does not engage in market-making.

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China Everbright Water

ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and
their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or
will be, directly or indirectly, related to specific recommendations or views expressed in the report. The DBS Group has procedures in place to eliminate,
avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. As of 24 February 2017, the
analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this
report (“interest” includes direct or indirect ownership of securities). The research analyst(s) responsible for this report operates as part of a separate and
independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by
either the research or investment banking function is handled appropriately.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBSVHK and its subsidiaries do not have a proprietary position in the securities recommended/mentioned in this report as of 23 Feb
2017.

2. Compensation for investment banking services:

DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities
as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to
obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security
discussed in this document should contact DBSVUSA exclusively.

3. Disclosure of previous investment recommendation produced:

DBS Bank Ltd, DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA may have published other investment
recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations
published by DBS Bank Ltd, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA in the preceding 12 months.

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Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd
(“DBSVS”) or DBS Vickers (Hong Kong) Limited (“DBSVHK”), which are exempted from the requirement to hold an
Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided
to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of
Singapore, and DBSVHK is regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong
Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within
the meaning of the CA.
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Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received
from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection
with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report
are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their
respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties
related or associated with any of them may have positions in, and may effect transactions in the securities mentioned
herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services
for the subject companies. They may also have received compensation and/or seek to obtain compensation for
broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn
No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated
by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its
respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation
32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an
Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the
contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS
Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

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 Company Guide
China Everbright Water

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are
only intended for institutional clients only and no other person may act upon it.

United This report is produced by DBSVHK which is regulated by the Securities and Futures Commission of Hong Kong.
Kingdom
This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd (“DBSVUK”). DBSVUK is
authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected
and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or
duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This
communication is directed at persons having professional experience in matters relating to investments. Any
investment activity following from this communication will only be engaged in with such persons. Persons who do not
have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC
rd
Branch) having its office at PO Box 506538, 3 Floor, Building 3, East Wing, Gate Precinct, Dubai International
Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial
Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and
no other person may act upon it.

United States This report was prepared by DBSVHK. DBSVUSA did not participate in its preparation. The research analyst(s) named
on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The
research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a
subject company, public appearances and trading securities held by a research analyst. This report is being distributed
in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to
Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified
persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any
securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for
jurisdictions qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such
jurisdictions.
DBS Vickers (Hong Kong) Limited
th
18 Floor Man Yee building, 68 Des Voeux Road Central, Central, Hong Kong
Tel: (852) 2820-4888, Fax: (852) 2868-1523
Company Regn. No. 31758

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