Beijing Enterprises Water Group

Strengths

  • Business activities with promising future prospects
  • Diversified water portfolio
  • Benefits from public-private partnerships

Risks

  • Relative high debt burden
  • Most of the profit is generated in China – Weak global diversification


Over the years, BEWG has constantly invested in those water sectors that have great long-term potentials and could be in greater demand in the future. The management follows a long term approach and it tries to adapt the business activities to environmental related challenges and changes. At the same time, however, it has diversified business activities, which means that it can better compensate for cuts in government infrastructure expenditures. The management also intends to develop BEWG into an asset light model company, which can reduce costs and profit fluctuations. Above all, an asset light model promises more flexibility with the positive effect that BEWG can react faster to new upcoming trends in the water market.


Due to the high level of investment, which will probably pay off in the long term, BEWG has a high debt burden. The company can still finance itself cheaply at the moment, but the individual debt ratios should not increase further, since companies should generally have a healthy balance sheet, especially in times of crisis. BEWG receives a certain proportion of its orders from municipal clients. However, across the country city governments have accumulated large mountains of debt in the past 10 to 15 years, which could lead to a decline in orders from cities and municipalities in the short to medium term. Though, it remains to be seen how the government in Beijing will deal with the increased debt burden of cities and municipalities in the future. One factor of uncertainty is definitely the sharp and steady rise in debt across the country. Although BEWG benefits greatly from public-private partnerships (PPP), it is also unclear how far Beijing’s political hand actually intervenes in the company or could intervene in exceptional circumstances.


HY1 2020 Results

HY1 2020 results down 18% as expected due to corona related impacts - interim cash distribution of HK8.4 cents per share.

Read More

BEWG - Chinese Water Treatment

   
2014201520162017201820192020

Forecast

Debt/Equity Ratio

2.032.042.342.25

Interest Bearing Debt / Equity Ratio

1.341.321.471.33

Net Debt/EBITDA

7.89.488.848.74

Revenue in billion HKD

8.9213.517.3321.1924.5928.19

Water treatment services as % of total revenue

362621191918

Water distribution services as % of total revenue

9689109

Construction service / building as % of total revenue

526265666264

Tech. Serv. and sale of machineries as % of t.r.

366699

Net Margin in %

2018.1818.5917.5418.1817.47

Net cash flow used in operating activities in million HKD

264-2,627-2,500-6,714-5,573-4.230

EPS HKD (Diluted)

0.20,28 (+40%)0,36 (+28,6%)0,42 (+16,7%)0,4713 (+11,5%)0.4904 (+4,05%)

Dividend per Share in HKD

0.0780.0950.1190.1550.1780.185