All eyes on SALCON, however, let’s compare with its peer

Edge covered Salcon this week’s issue as its profit surged from RM8.8Million to RM22Milion year-to-year. Which is over nearly 300%. It’s share price surged to the high of 73 cents this morning.

健忘 has previously covered on the SALCON 2009 Quarter 4 result, so i will not repeat it again.
However, in order to appreciate the true value of SALCON, why not we take a look on its peer listed in Singapore Exchange for come comparison. From there, we will know how well SALCON is performing compared to its regional peer.

To my knowledge, there are currently two main company in SGX in water treatment. HYFLUX WATER TRUST & EPURE. I’m not going to go into detail from Hyflux Water Trust, as it’s result are not so appearing to me. Epure is on of the China’s company listed in SGX, for KLSE, we called it red chip, in SGX they called it S-Chip.

As some of the background, in 2007, Epure was named one of the 10 Most Influential Water Companies in China and the Top 10 EPC Companies in China’s water industry.

All the while, people are having a concept where normally good China companies would probably listed in Hong Kong and Singapore, only those that not top of the line ….will come to Malaysia.

In 2009, Epure PAT stand at RMB280 Million (RM140M, around 7 times of SALCON 2009’s profit) versus RMB203 Million (RM100M) in 2008, which translate to over 38% of PAT growth per annual.

2009 EPS stands at RMB 0.213 (S$0.0436), currently its share price stays at S$0.89, which is equivalent to 20xPE. However, do bear in mind that the tolerance level of PE might be different from market to market.
Let’s that a quick peek on how does CIMB rate this counter.

Based on its Q4FY09 result, CIMB rated it a Outperform with target price of S$1.33 (current price at S$0.88-0.89).
This is how it’s quoted on its outlook:
Positive outlook. The Marafiq deal should open the door for Epure to tap immense
demand for water and wastewater treatment services in the Middle East and Asia.
Apart from water treatment, we believe there is growth potential in water recycling
i.e. selling recycled water to industrial users surrounding plants. Utilisation would
depend on the speed of infrastructure development in the vicinity. Epure has high
earnings visibility and a solid track record in sustaining its margins, in our opinion.

Edge Singapore also features this counter before (with a buy call) and if my memory served me well, the share price are not yet factor in the effect from its dual listing (dual listing in Hong Kong this year).
With the buy in price of S$0.90 cents, it still have an upside of 47% (till S$1.33).

The most attractive is the conversion rate, imagine that every 1k that you earned in SGD, is equivalent to 2.5k in RM. Once of the purpose of my investment, multiple folds on my capital.
I completed its detail evaluation of EPURE, share it next time.
Cheers and happy investing!