London, UK, 8 August 2018

Edison issues outlook on China Water Affairs Group (855)

China Water Affairs Group (CWA) is well positioned to take advantage of the favourable trends that we expect in the Chinese water and sewage market. CWA's portfolio of water assets, experienced team, stable financial position and impressive track record should enable the company to continue to grow returns for shareholders.

Following the recent NDRC announcement, we have revised our forecasts (FY19e EPS HK$0.815 vs HK$0.762 previously), taking a more optimistic view on the scope for tariff increases and we also revise our minority interest charge. Blended peer group multiples indicate a valuation for CWA of c HK$10.7/share. Applying only peer group P/E multiples, CWA's valuation would rise to HK$11.7/share (FY19) and HK$12.4/share (FY20). The two-year PEG ratio is c 0.9x (at HK$11/share).

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