SINGAPORE (May 25): SAC Advisors is maintaining its “buy” call on Sanli Environmental with an unchanged target price of 36 cents, even after the environmental engineering company reported lower FY18 earnings of $3.1 million, down 40.7% from $5.2 million a year ago despite higher revenue.

See: Sanli Environmental posts 40.7% lower FY18 earnings of $3.1 mil; announces 0.25 cent dividend

This comes on a potential $6.5 billion worth of contracts to be rolled out by the Public Utilities Board (PUB) by end-2018 and over 2019 for Phase 2 of its Deep Tunnel Sewerage System project, for which Sanli’s management guided it intended to bid for 12 out of the 14 contracts to be offered.

In a Friday report, analyst Terence Chua highlights Sanli’s optimism of winning at least one to two contracts out of this to result in $200-500 million worth of order book. Its management’s confidence was further underscored by an ongoing ramp-up in the hiring in view of these contracts.

“During our meeting with the management at the FY18 results briefing, the management team talked about the increased hiring that the group has embarked on in view of the potential contracts that PUB will be rolling out, impacting their bottom-line in the near-term,” notes Chua.

“We see this however, as a temporary phenomenon as management builds up capacity to prepare for the new contracts to be rolled out… We also understood from management that the hiring was for specialists and engineers,” he adds.

Further, in spite of continued weakness in the offshore and marine (O&M) segment, the analyst thinks the worst days of the O&M sector may be over.

“During the FY18 results briefing, we got a sense from management that the landscape is now more favourable,” observes Chua.

As at 11.30am, shares in Sanli are trading flat at 25 cents or 9.2 times FY19E book.