SINGAPORE (Feb 14): DBS Group Research likes CITIC Envirotech for achieving breakthroughs in new deals and expects new deal execution to accelerate.

The research house also expects CITIC Envirotech to grab more market share in the water sector, thanks to its leading technology in membrane.

“Nevertheless, the stock has gained 35% in the past two months which DBS believes has reflected the positives. Maintain ‘hold’ with 12-month price target,” says analyst Patricia Yeung in a Tuesday report.

After China Reform Puissance acquired KKR’s entire stake of 269 million shares at $1.45 each and became the second largest shareholder of CITIC Envirotech with a 23.85% stake, the closer co-operation between Puissance and CITIC Group has allowed CITIC Envirotech to win more deals.

For instance, CITIC Envirotech recently won its first river restoration project in Jiangsu and the first BOO project in hazardous waste treatment. In addition, CITIC Envirotech has also secured the second PPP project for the treatment of industrial waste water in Guangdong.

“In fact, CITIC Envirotech had project wins of RMB 5 billion ($1 billion) in 2016, compared with about RMB 3 billion in 2015,” says Yeung, “We are optimistic that CEL’s deal flow will continue to grow. With a stronger order backlog, we expect construction progress to accelerate going forward.”

While CITIC Envirotech’s industrial wastewater treatment plants are using its MBR (membrane bioreactor), Yeung says she is seeing the application of MBR in more municipal wastewater treatments as the standard has been enhanced, such as in the Chengdu Xingrong project.

To further enhance the technical know-how in membrane, CITIC Envirotech has formed a JV with Aquarius Membrane in the US to carry out R&D and explore new business opportunities in the US, such as reverse osmosis membrane and nanofiltration membrane, which have wide applications.

“We have revised up our FY17 earnings estimate by 20% to reflect the acceleration in execution and construction progress,” says Yeung.

Shares of CITIC Envirotech are up 0.6% at 82 cents.