According to a research report by Zhongtai International, a consortium led by Grandblue Environment (600323 CH) proposed privatizing Canvest Env (01381) for HKD 4.90 per share. If implemented, Grandblue Environment will hold 92.77% of the total shares, while the existing controlling shareholders (Ms. Li Yongyi and associates) will retain the remaining 7.23%. Grandblue Environment stated that it will not raise the tender offer price. Meanwhile, Canvest Env will sell assets to existing controlling shareholders.
Excluding the privatization issue, the company has lacked new waste-to-energy projects in recent years due to the mature development of the industry. On the other hand, the company is actively developing non-waste-to-energy businesses such as environmental sanitation, but the income scale is still relatively small.
After updating the FY23 cash flow statement figures, the bank has technically lowered the shareholders' net income forecast for FY24-25 by 5.2% and 4.0%, respectively, and correspondingly lowered the target price from HKD 4.40 to HKD 4.20, corresponding to a 2024 target P/E ratio of 8.5 times. After a recent rise in stock price, the current price has 4.1% downside potential. The bank has adjusted its rating from "buy" to "neutral". Relative to valuation, the privatization tender offer price of HKD 4.90 is attractive, equivalent to a 2024 P/E ratio of 10.0 times, 16.7% and 11.9% higher than the bank's target price and current price, respectively. Investors may consider the tender offer, but should note the risks of implementing privatization.