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Edison Investment Research Limited: Edison issues outlook on China Water Affairs Group (855)

Edison Investment Research Limited


Edison Investment Research Limited: Edison issues outlook on China Water Affairs Group (855)


16-Apr-2019 / 10:03 GMT/BST


London, UK, 16 April 2019

Edison issues outlook on China Water Affairs Group (855)

We believe China Water Affairs Group's (CWA) strong financial position (net debt/equity FY18 c 70%) and impressive track record of generating returns for shareholders should enable it to exploit the favourable market conditions and allow for a continuation of its strong growth profile. Following the recent acquisition of 29.5% of Kangda International, CWA's market valuation appears undemanding compared to its peers despite its track record of delivering attractive returns for its shareholders.

Applying peer group average multiples would indicate a valuation of c HK$11.4 per share (up HK$0.9 per share since we last published in December 2018), for CWA, c HK$3 per share above the current share price. At HK$8.2 per share, CWA trades on a PEG ratio of only 0.6x versus 1.6x for its peers. Applying an undemanding PEG ratio of 1.0x would indicate a valuation of HK$13.0 per share. Our DCF points to a valuation of HK$11.9 per share.

Click here to view the full report.

All reports published by Edison are available to download free of charge from its website
www.edisongroup.com
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