Re:market correction... by MacGyver30th, Jul. 04:11 PM Market is bullish again.. Good trading period from now to early-m...
Re:Map Technology - ... by happin30th, Jul. 03:16 PM MAP is now at 6 cents. Noticed that yesterday's last trade was 1...
Re:Rokko-An Explosiv... by neontet30th, Jul. 07:41 AM all these semicon companies are doing really well.
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market correction by pathfinder30th, Jul. 12:10 AM With all US company result good news ending in 2 weeks time & no ...
Re:Rokko-An Explosiv... by MOSBY29th, Jul. 11:49 PM http://www.remisiers.org/research//dailyex2307.pdf
TP :$0.30...
CHINA WATER: Govt earmarks 143 bln yuan for urban water supply 2006-2010
Written by Andrew Vanburen (China Correspondent)
Friday, 05 March 2010
Tapping the PRC: China Water anticipates a rising tide of profits
BETWEEN 2006 and 2010, the Chinese government has pledged 143 bln yuan to support the country’s urban water supply.
China is one of the most water resource poor countries in the world per capita.
Water pollution, over-exploitation of underground aquifers and low efficiency of water usage haveaggravated the imbalance between water supply and demand.
China is still undergoing rapideconomic growth with continued extensive development in industry, agriculture and urban infrastructure resulting in huge consumption of water resources.
Water shortages will become potential bottlenecks in the country’s smooth economic development.
To this end, the Chinese government has implemented market-oriented reforms and launched a series of preferential policies covering investment and water pricing structure.
China Water Affairs Group (HK:855) (www.chinawatergroup.com) is making greater inroads into supplying tap and raw water to cities across the nation and pledges to explore and develop a business model which can function effectively with its own features, technology and capital operation to benefit society.
The statistics are staggering.
In China, 54% of households are not connected to water pipelines, 74% are not equipped with bathing facilities and 77% lack proper or any type of lavatories.
These figures are drastically out of synch with China’s phenomenal economic expansion and China Water Affairs is confident that it will see tremendous benefits in helping bridge the gap.
Ripe for Harvest
China Water Manager Nick Huang. Photo: Andrew Vanburen
China Water Affairs has turned around most of its water operations which previously had been loss making. During the first half of the 2009/10 financialyear, the company saw its core business gross profit skyrocket 84% year-on-year to 252 mln hkd, while profit from operation swung to 340 mln hkd from a loss of 166 mln hkd a year earlier.
"We expect around 20% annualized organic growth going forward. China Water has a unique business model in the mainland market, so we enjoy a virtual monopoly of sorts,” Manager Nick Huang said.
He told NextInsight, Aries Consulting , and a large group of fund managers recently that the company spent 95% of its operational investment on water assets such as water plants and underground pipelines, while sewage treatment only accounted for 3% of its recent revenue.
"Our chairman (who owns 19.29% of the company’s shares) has said that our business focus is water supply and would remain that way,” Mr. Huang said.
He added that the sewage water business in China is conducted on a build, operate, transfer (BOT) model.
"After 25 or 30 years, at the end of the concessions, the facilities are then transferred to the government in this sector. But for our tapwater business, we operate on an ownership basis, and we insist on being the dominant shareholder or outright owner. This is a unique business model and allows us efficient managerial control and decision-making power.”
He said raw water business was typically run by the local government, but China Water owned and operated the water supply and the downstream pipes.
Tapping the Water Market
The Bottom Line: China's need for tap and raw water is growing exponentially. Photo: China Water
Lack of water in China means no drying up of potential clients.
According to the World Bank, water resources per capita in China (2,156 cubic meters/yr) are only one-fourth of the global average while its water consumption (per unit of GDP) is 5.5 times the global average.
"Most of this discrepancy is from demand from China’s substantial industrial sector. Heavy water users such as metallurgy, cement, paper and even semiconductors are all major clients of ours. And with China’s ongoing 4.5 trln yuan stimulus and no slowdown on the horizon for infrastructural buildup, we have experienced fast growth even amid the financial turmoil.
“The water supply business in China will keep growing at a steady pace in the foreseeable future,” Mr. Huang said.
China Water fully benefited from ever-increasing demand from a large and fast growing population due to the rapid growth of the economy, industrialization and urbanization.
"There is an acute shortage across China resulting from the inadequacy of natural water supplies, uneven distribution of water resources, pollution and wastage. Over 400 of 660 major cities suffer from water shortages,” he said.
There was also explosive growth in the unusually low water tariffs in place in the market.
"The water tariff is very low in China, averaging only about 0.5% of disposable income. Studies show that if this number is under 2%, there is very little incentive to conserve, either by residential or industrial users."
China Water Group
Figures in hkd
Apr-Sep 09
Apr-Sep 08
Revenue
671 mln
386 mln
Gross profit
252 mln
137 mln
Profit (loss) from operations
340 mln
(166 mln)
Profit (loss) for the period
271 mln
(172 mln)
Earnings (loss) per share
17.48 cents
(15.14 cents)
Dividend per share
2 cents
nil
This meant that there is ample room for tariff increases over time.
Coupled with the effect of growth in water demand, the organic growth of the water supply business is over 20% annually for the firm.
The company also has a plan to spin off non-core assets at an opportune time to realize shareholder value.
And solidifying its financial foundation was essential in preparing for an anticipated investment boom needed to meet the needs of an increasingly thirsty country and economy.
"In August of last year, we entered into a strategic cooperation agreement with China Construction Bank, with CCB agreeing to provide loan and credit facilities of up to 2 bln yuan to fully support our development and to provide financial services to us on favorable terms with priority.
“And this January, we announced another strategic cooperation with China Everbright Bank. The lender preliminarily agreed to provide to us loans and credit facilities of up to an indicative amount of 3 bln yuan for group business development. So the company has ample unused credit facilities which can be utilized for future development,” he added.
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