Share price is low though fundamentals are the same.
Investors on the prowl for cheap stock with potential should cast their eyes and wallets towards China Everbright Water.
According to a report by RHB, China Everbright’s share price—which has been beaten down by flagging market conditions—presents a good entry level since there have been no changes in the company’s fundamentals. Earnings per share is expected to skyrocket as gearing level is currently low and the issuance of new shares is unlikely.
Moreover, China Everbright is also hunting for new financing measures. In a bid to ease investors’ concerns on its potentially high gearing and dilution from the issuance of new shares, China Everbright Water is exploring the option of setting up development funds to finance new projects.
Based on the company’s guidance, the expected returns of these funds range between 6% and 8%. RHB believes that this will help to improve its ability to tackle more projects while maintaining a healthy net gearing level. Its net gearing is expected to climb to 0.63x in FY16 as the company is still likely to reap benefits from the low interest rate environment in Mainland China.
The company is also expected to grow its capacity by 1.5 tonnes, in line with management’s target to boost its total design capacity to 10m tonnes by FY19. In addition, new projects from hereon would be key catalysts to boost growth.
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