SIIC Environment profits grow 19% to $24.5m in Q2

High debt from its new acquisition slightly dragged operating profit.

SIIC Environment Holdings’ (SIIC) profits grew 19% YoY to $24.5m (CNY120m) in Q2.

According to RHB, revenue rose 79% to $203.2m (CNY995m), whilst operating profit surged to $57.2m (CNY280m), thanks to acquisition of two companies last year.

SIIC acquired Longjiang Environmental Protection Group (Longjiang Group) and Ranhill Water (Hong Kong) Ltd (RWHK) in 2016.

The company's overall operating profit was dragged down by higher finance expenses, no thanks to the higher-interest bearing debt and high gearing of Longjiang Group.

"Management guided that it has refinanced a portion of the latter’s debt with interest costs of 6-plus to 4-plus percent. However, it would take another six months to one year to replace all of Longjiang Group’s debts," Cai said.

Most of SIIC's large projects are done with construction phases and have already begun operations.

"We note from management that SIIC has past the peak of its construction phase. As such, revenue from operations grew much faster (+192% YoY) than construction revenue (+59% YoY) in 2Q17," RHB analyst Juliana Cai said.