EVERBRIGHT ENVIRONMENT(257.HK):STABILISING OPERATIONS OFFER DECENT YIELD;UPGRADE TO BUY
EVERBRIGHT ENVIRONMENT(257.HK):STABILISING OPERATIONS OFFER DECENT YIELD;UPGRADE TO BUY
CEE's share price suffered in the past two years on lacklustre REF payment and concerns of deteriorating local government fiscals. As new project construction slows down, CEE's profitability is moving closer to actual figure as IFRIC 12's accounting impact wanes. The company is on track to report its first positive FCF in history this year, strengthening its balance sheet and dividend payout capability, if not willingness. We upgrade CEE from HOLD to BUY rating with a new TP of HK$4.50, implying 5.4% 2024 dividend yield.
過去兩年，CEE股價受到REF支付不足和地方政府財政惡化的影響而受挫。隨着新項目建設的放緩，IFRIC 12的會計影響減弱，CEE的盈利能力逐漸接近實際情況。如果沒有意願，該公司有望在今年報告有史以來第一次正收益自由現金流，從而增強其資產負債表和股息支付能力。我們將CEE的評級從持有升級至購買評級，目標價爲4.50港元，對應2024年5.4%的股息收益率。
Key Factors for Rating
評級的關鍵因素
Operations update. Mgmt. sees the worst situation in 2022-23 has passed and receivable days for waste treatment fees are within budget YTD. The company aims to add 3,000tpd waste-to-energy (WTE) project and 255ktpd waste water treatment (WWT) in 2024, representing 2.2% and 4.6% YoY growth respectively. The slowing expansion caps CEE's capex at c.HK$6bn in 2024, with adjusted OCF on track to exceed HK$8bn. CEE may achieve its first positive FCF since inception (2023: -HK$280m FCF). The robust cash flow may help CEE to gradually replenish its balance sheet (140% adjusted net gearing at end-2023) while comfortably maintaining current payout ratio (30-32%), if not raising it at some point of time in the absence of major M&A.
運營更新。管理層認爲，2022-23年最困難的局面已經過去，處理費收款日到目前爲止在預算之內。公司計劃在2024年增加3,000噸/日的垃圾焚燒發電項目和255千噸/日的廢水處理項目，分別表示2.2%和4.6%的年增長率。擴張放緩將限制CEE在2024年的資本支出爲約60億港元，而調整後的經營現金流有望超過80億港元。CEE可能會實現自創立以來的首次正自由現金流（2023年：負2.8億港元的自由現金流）。該公司的強勁現金流或有助於逐步補充其資產負債表（2023年末爲140%的調整淨槓桿率），同時在缺乏重大併購的情況下舒適地保持目前的股息支付比率（30-32%），甚至在某個時候提高它。
Continued cost savings from refinancing offshore loans. CEE's finance expenses have peaked in the last two years, and may start to decline in the coming years as 1) capex slows down; 2) active refinancing activities are carried out. According to the management, the company has refinanced most of its offshore HK$/USD borrowing to either onshore or offshore RMB. With onshore borrowing generally costing between 2.7-2.8% p.a., the active management should help to achieve further savings in 2024, in our view.
繼續通過再融資離岸貸款實現成本節約。CEE的財務費用在過去兩年中達到峯值，並可能在未來幾年出現下降趨勢，因爲1）資本支出放緩；2）持續進行再融資活動。據管理層稱，該公司已將其大部分離岸港元/美元借款再融資爲在岸或離岸人民幣。根據我們的觀察，隨着在岸借款一般在每年2.7-2.8%之間，積極的管理應有助於在2024年實現進一步節省。
Dividend yield offering. We believe CEE's core WTE and WWT segments are relatively stable businesses in the environmental sector, with limited off-BS risk exposures and operational fluctuations. Its earnings visibility is increasing as construction revenue/profits under IFRIC 12 declines, which translates into DPS visibility that should be welcomed by yield-gap-seeking investors, in our view.
股息收益率提供。我們認爲CEE的核心垃圾焚燒發電和廢水處理業務是環保板塊中相對穩定的業務，其離表風險敞口和經營波動有限。隨着IFRIC 12下的建築收入/利潤下降，其收益的可見性正在提高，這轉化爲應受歡迎的DPS可見性，受收益差距尋求者投資者的青睞。
Key Risks for Rating
評級的主要風險
Lower-than-expected operational margins; value-destructive M&A. Valuation
較低的運營利潤率；破壞價值的併購。估值
Upgrade to BUY. We leave our forecasts largely unchanged while hiking DCF-based TP to HK$4.50 largely on lower cost of debt assumption. Our new TP implies 5.4% 2024E dividend yield, which we deem still reasonable against CEE's stabilising operational environment.
升級至買入。我們保持預測基本不變，同時根據更低的債務成本假設，將基於DCF的目標價上調至4.50港元。我們的新目標價對應2024年5.4%的股息收益率，我們認爲這仍然是合理的，考慮到CEE的穩定運營環境。
譯文內容由第三人軟體翻譯。