Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Thematic (Sector/Industry)

Despite improving power demand, China’s coal-fired independent power producers’, or IPPs’, fourth-quarter profits are set to be hit by surging coal prices. We estimate the operating margins for major coal-fired IPPs will be just around breakeven in the fourth quarter. For 2017, while the government’s confirmation that power tariffs will be unchanged is a little disappointing, we think government’s easing in coal supply restrictions will dampen coal prices, leading to margins recovery for coal-fired IPPs.We have reflected our slightly positive 2017 outlook into our earnings estimates and maintain our fair value estimates of HKD 7.40, HKD 2.54 and HKD 17.00 for <a href="https://www.smartkarma.com/entities/28" target="_blank" data-smartkarma-citation="entities:28:1">Huaneng Power Intl Inc H (902 HK)</a>, <a href="https://www.smartkarma.com/entities/3664" target="_blank" data-smartkarma-citation="entities:3664:1">Datang Intl Power Gen Co H (991 HK)</a>, and <a href="https://www.smartkarma.com/entities/5385" target="_blank" data-smartkarma-citation="entities:5385:1">China Resources Power Holdings Co. Ltd. (836 HK)</a>, respectively, ahead of the full-year earnings results in March.Analysts: Jennifer Song and Lorraine Tan, CFA

Despite improving power demand, China’s coal-fired independent power producers’, or IPPs’, fourth-quarter profits are set to be hit by surging coal prices. We estimate the operating margins for major coal-fired IPPs will be just around breakeven in the fourth quarter. For 2017, while the government’s confirmation that power tariffs will be unchanged is a little disappointing, we think government’s easing in coal supply restrictions will dampen coal prices, leading to margins recovery for coal-fired IPPs.We have reflected our slightly positive 2017 outlook into our earnings estimates and maintain our fair value estimates of HKD 7.40, HKD 2.54 and HKD 17.00 for Huaneng Power Intl Inc H (902 HK), Datang Intl Power Gen Co H (991 HK), and China Resources Power Holdings Co. Ltd. (836 HK), respectively, ahead of the full-year earnings results in March.Analysts: Jennifer Song and Lorraine Tan, CFA

Softening Coal Prices and Improving Demand Will Drive a Better 2017 Outlook for Coal-Fired IPPs.

After extending our explicit forecast periods to 10 years from five years, w e have raised our fair value estimate for <a href="https://www.smartkarma.com/entities/14315" target="_blank" data-smartkarma-citation="entities:14315:1">China Gas Holdings Ltd (384 HK)</a>, or CGH, to HKD 11.40 from HKD 10.30; that for <a href="https://www.smartkarma.com/entities/20525" target="_blank" data-smartkarma-citation="entities:20525:1">China Resources Gas Group Ltd (1193 HK)</a>, or CRG, to HKD 27.50 from HKD 22.50; and that for <a href="https://www.smartkarma.com/entities/316" target="_blank" data-smartkarma-citation="entities:316:1">Enn Energy Holdings Ltd (2688 HK)</a>, or ENN, to HKD 50.00 from HKD 44.00.We think CGH, CRG, and ENN still have further room to grow, as their penetration rates, at 52%, 45%, and 55%, respectively, are still relatively low compared with the average level of 70% in developed markets. At current price levels, CRG and ENN look attractive, while CGH is fairly valued, in our view.Analyst: Jennifer Song &amp; Chokwai Lee

After extending our explicit forecast periods to 10 years from five years, w e have raised our fair value estimate for China Gas Holdings Ltd (384 HK), or CGH, to HKD 11.40 from HKD 10.30; that for China Resources Gas Group Ltd (1193 HK), or CRG, to HKD 27.50 from HKD 22.50; and that for Enn Energy Holdings Ltd (2688 HK), or ENN, to HKD 50.00 from HKD 44.00.We think CGH, CRG, and ENN still have further room to grow, as their penetration rates, at 52%, 45%, and 55%, respectively, are still relatively low compared with the average level of 70% in developed markets. At current price levels, CRG and ENN look attractive, while CGH is fairly valued, in our view.Analyst: Jennifer Song &amp; Chokwai Lee

Raising Fair Value Estimates for City Gas Operators After Extending Our Forecast Periods

China

Tianjin Binhai Energy & Development Co., Ltd. mainly engages in electrical power generation and heat generation.

Tianjin Binhai Energy & Devel. Co., (000695 CH)

Heilongjiang Interchina Watertreatment Co Ltd. operates in the water supply and sewage treatment businesses.

Heilongjiang Intrchna Watrtrertmt (600187 CH)

Jilin Province Chuncheng Heating Company Limited operates as a heat service provider in Jilin Province. The Company supplies heat procured from local cogeneration plants and coal-fired boilers. Jilin Province Chuncheng Heating also offers engineering construction, engineering maintenance, design services, and electrical and instrument maintenance and repair services.

Jilin Province Chuncheng Heating (1853 HK)

Changchunjingkai (Group) Company Ltd. develops and manages the Changchun Economic & Technical Development Zone. The Company also undertakes infrastructure construction projects and provides building installation services.

Kangda International Environmental Co., Ltd. invests and operates wastewater treatment facilities in China.

Shanghai Safbon Water Service Company Limited sells system integration equipment, and provides related technical services, installation and construction services to water treatment system.

Shanghai Safbon Water Service (300262 CH)

Yunnan Water Industry Investment & Development Co. Ltd. offers water supply and water industry investment services. The Company also provides sewage treatment, water recycling, water resource development, and other related services.

China Environmental Technology Holdings Ltd. is engaged in the sewage treatment business. The Company is also involved in the provision of technical services for sewage treatment business, trading of vehicles, machinery, equipment, spare parts and provision of engineering services.

ELL Environmental Holdings Ltd is a wastewater treatment services provider. The Company provides the design of wastewater treatment facilities, through the procurement of suitable equipment and materials, as well as on-going operation and maintenance of the facilities. ELL Environmental Holdings operates in China.

Beijing Water Business Doctor Co., Ltd. provides industrial water treatment services.  The Company provides periodic services for coal chemical, petrochemical, electricity industries via trust management, BOT (Build-Operate-Transfer) and EPCC (Engineering-Procurement-Construction & Commission) financing arrangement.

Beijing Water Business Doctor Co, Ltd. (300055 CH)

Cadiz Inc. develops and manages water and agricultural resources in California. The Company's portfolio of assets encompasses landholdings with groundwater resources and water storage availability, agricultural properties with water rights, and contractual water rights.  Cadiz also holds technologies for water conservation, reclamation, production, and conveyance.

Pure Cycle Corporation provides water and wastewater services to customers located in Denver, Colorado.  The Company operates water and wastewater systems, including designing, constructing, operating, and maintaining systems serving customers in the Denver metropolitan area. Pure Cycle also owns water recycling technologies which process wastewater into pure potable drinking water.

Eastern Water Resources Development and Management Public Company Limited supplies water to seven provinces in the eastern seaboard of Thailand. The Company also provides consultancy services for clean water production and water distribution, as well as maintenance of water pipelines and related equipment.

Eastern Water Resources Development and Management (EASTW TB)

Eastern Water Resources Development and Management

PBA Holdings Berhad is an investment holding company.  The Company, through its subsidiaries, undertakes business activities of a water supplier involved in the abstraction of raw water, treatment of water, and supply and sale of treated water to consumers.

Salcon Berhad designs, builds, operates, and maintains municipal potable water, sewerage, and industrial waste water facilities. The Company also designs, builds and commissions palm oil mills, as well as provides mechanical and electrical engineering services for general industries and investment holding.

Zimmite Taiwan Ltd. provides industrial water treatment services. The Company promotes reduced water usage and reduced energy consumption through preventing metal corrosion, inorganic and organic deposition, microbiological growth, and biofilm. Zimmite serves a broad range of customers including refineries, production plants, steel mills, office buildings, and public facilities.

Taliworks Corporation Berhad and its subsidiaries manage, operate, and maintain water treatment plants in Malaysia.  The Company also constructs water treatment plants, manages water distribution systems and has research and development activities related to water treatment.

Kunming Dianchi Water Treatment Co. Ltd. offers water treatment services. The Company provides sewage treatment, recycled water utilization, sewage sludge recycling, and other services. Kunming Dianchi Water Treatment also provides tap water production, atmospheric management, soil remediation, and other services.hina.

Kunming Dianchi Water Treatment (3768 HK)

Luzhou Xinglu Water (Group) Co., Ltd. offers water supply services. The Company provides water transmission, system management, network maintenance, and sewage treatment services.

Puncak Niaga Holdings Berhad is an investment holding.  The Company, through its subsidiaries, operates, maintains, manages, constructs, and undertakes the rehabilitation and refurbishment of water treatment facilities.  Puncak Niaga also operates, manages, maintains, and monitors the operation of dams.

Shenyang Huitian Thermal Power Co., Ltd. operates in city centralized heat supply business and provides heating engineering services.  The Company also develops and manages in real estate properties.

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Shenyang Huitian Thermal A (000692 CH)

Softening Coal Prices and Improving Demand Will Drive a Better 2017 Outlook for Coal-Fired IPPs.

Despite improving power demand, China’s coal-fired independent power producers’, or IPPs’, fourth-quarter profits are set to be hit by surging coal...

Morningstar, Inc.

Raising Fair Value Estimates for City Gas Operators After Extending Our Forecast Periods

After extending our explicit forecast periods to 10 years from five years, w e have raised our fair value estimate for China Gas Holdings Ltd (384...

Morningstar, Inc.

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