Sound Global

[l0nEr]

back to 0.50 range? any comments?
still likely to benefit from China's water policy... especially after the floating pigs in Huangpu river.

[CityFarmer]

back to 0.50 range? any comments?
still likely to benefit from China's water policy... especially after the floating pigs in Huangpu river.

It is a usual scenario for an (value) investor

If the confidence on the valuation intact, then it is a good time to buy at dip, i.e. be greedy when other fearful

If the confidence on the valuation shaky, then join the herd, avoid it and be fearful.

(vested, and continue to increase interest if opportunity arises)

[Greenrookie]

CF, I did a closer look and track their OCF and the start and completion of various water projects over the quarters for the past few years. Was very concerned with the frequent and rather hugh negative OCF. Their cash cycle is rather inpredicitable too. Going forward, they are going o start on a 2 billion water plan project soon, the largest so far, and I believe judging by the closeness in timing might be the reason why they need to raise funds thro senior notes. When they are already coping with negative cash flow with smaller and projects that are more spaced out over the years (I noticed orders always peak at q4 and then temper off and then peak at q4 again, and q4 peaks are getting higher and higher), are they going to suffer another large outflow of cash in the near future?

If I collate my data correctly, they didin't have a positive OCF since 2009.

Would really like to hear your views. Feel free to point out anything I missed or errors. Thank you

[CityFarmer]

CF, I did a closer look and track their OCF and the start and completion of various water projects over the quarters for the past few years. Was very concerned with the frequent and rather hugh negative OCF. Their cash cycle is rather inpredicitable too. Going forward, they are going o start on a 2 billion water plan project soon, the largest so far, and I believe judging by the closeness in timing might be the reason why they need to raise funds thro senior notes. When they are already coping with negative cash flow with smaller and projects that are more spaced out over the years (I noticed orders always peak at q4 and then temper off and then peak at q4 again, and q4 peaks are getting higher and higher), are they going to suffer another large outflow of cash in the near future?

If I collate my data correctly, they didin't have a positive OCF since 2009.

Would really like to hear your views. Feel free to point out anything I missed or errors. Thank you

The business model of WWT is capital intensive, long pay-back period but stable recurring income and reliable cash flow. Looking into any WWT company CF statement, negative OCF is a norm as of now.

It takes 2-3 years of construction time, before goes into operation, where the recurring cash flow starts. The pay-back is typically 10 years

The company started BOT projects dated back to 2009, most of them already in operation i.e. recurring cash flows started.

This period is at the peak of demand for WWT. Base on the last few BOT projects secured, the company is going after higher quality projects versus their previous ones.

The debt is more than 2.2 bil RMB, but the company is in net cash position. The funding of the new BOTs are supported both by the debt, and the recurring income from previous BOTs. I don't see the likelihood of excessive outflow of CF in near term which demand another cash call with more debt.

Expensive debt is one of major concern, especially the recent senior note. It seems there are internal dispute on capital funding between CFO and the management, which 2 CFO changes within 2 years. This is definitely a big negative with a company with capital intensive business.

[Greenrookie]

Hi CF,

Thanks fr your input, I thought a number of projects were turnkey projects, meaning they should be paid for constructing and completing the projects. As such, shouldn't there be some periods of positive spike in OCF?

[CityFarmer]

Hi CF,

Thanks fr your input, I thought a number of projects were turnkey projects, meaning they should be paid for constructing and completing the projects. As such, shouldn't there be some periods of positive spike in OCF?

Yes, BOT projects are paid for their construction with a premium (margin), but not with cash, but with service concessions. It is been accounted as service concession receivables in balance sheet.

There are positive spike in service concession receivables, but not in OCF

[Greenrookie]

OIC... Thanks.. No wonder no correlation of whatsoever. Thanks. CF

[Greenrookie]

After tracking through the projects investment values(see attachment) and the relationship with revenue, receivables and etc. Here are some of my findings:


Negatives:
1)I realized it takes roughly only 12-18 months for EPC revenue to be realized, (after construction starts) and as such, 2013 should be a rough year, at least for the next three quarters. (Lower projects' values for those clinch in 2011 and late 2010 as compare to those in 2010 and late 2009)
2) O&M revenues and profits will still be insignificant for 2013.
3) Financing costs will cost NP margin to be compressed to the 10-13% range, far lower than the av of 18-20% range.
4) The total financing costs roughly equals to the 1 cents dividends to be given in past years, given the poor earning expectations for 2013, I foresee no dividends for 2013 too.

Positives:
1) Better quality projects cliniched in 2012, which will lead to better earnings in 2014 onwards.
2) O and M contributions set to keep increasing for the next few years.
3) Sector outlook still very positive (everyone knows this)

Personal thoughts.
Not sure if the lumpiness in earnings in 2013 will provide buying opportunities or will investors actually like the higher OCF due to the slowdown of activities.
If the company continue to win municipal projects of very high values,I am not sure if they will start to do equity raising (Given the very exp. senior notes, and the need for capital for projects, this is not a unlikely proposition)


Hence the recent down beaten price might be earning expectations related rather than just a knee-jerk reaction to a one-off poor quarter earning, but the valuation seems fair if you take into consideration the longer term earning power.

Very interested but no vested yet.

[CityFarmer]

After tracking through the projects investment values(see attachment) and the relationship with revenue, receivables and etc. Here are some of my findings:


Negatives:
1)I realized it takes roughly only 12-18 months for EPC revenue to be realized, (after construction starts) and as such, 2013 should be a rough year, at least for the next three quarters. (Lower projects' values for those clinch in 2011 and late 2010 as compare to those in 2010 and late 2009)
2) O&M revenues and profits will still be insignificant for 2013.
3) Financing costs will cost NP margin to be compressed to the 10-13% range, far lower than the av of 18-20% range.
4) The total financing costs roughly equals to the 1 cents dividends to be given in past years, given the poor earning expectations for 2013, I foresee no dividends for 2013 too.

Positives:
1) Better quality projects cliniched in 2012, which will lead to better earnings in 2014 onwards.
2) O and M contributions set to keep increasing for the next few years.
3) Sector outlook still very positive (everyone knows this)

Personal thoughts.
Not sure if the lumpiness in earnings in 2013 will provide buying opportunities or will investors actually like the higher OCF due to the slowdown of activities.
If the company continue to win municipal projects of very high values,I am not sure if they will start to do equity raising (Given the very exp. senior notes, and the need for capital for projects, this is not a unlikely proposition)


Hence the recent down beaten price might be earning expectations related rather than just a knee-jerk reaction to a one-off poor quarter earning, but the valuation seems fair if you take into consideration the longer term earning power.

Very interested but no vested yet.

Nice work on the company.

Bulk of BOT projects started between 2010-2011, so O&M business will continue to grow rapidly in next few years, in 50%-100% annually IMO.

Finance cost has being the biggest letdown. Failure to fully redeem the CB is also a disappointment. It will continue to drag the profitability if no further improvement.

Cash call via placement never a solution on Mr Wen table since listed. Capital was raised via debt. You may notice no dilution till now, although there is possibility of dilution from CB (>10% if fully converted). Placement is not always a cheaper solution for capital IMO. Let's see the progress...

(vested)

[CityFarmer]

The company AGM will be held in HK, instead of Singapore.

Anyone will attend?

http://info.sgx.com/webcorannc.nsf/Annou...endocument