ASIAN INSIGHTS VICKERS SECURITIESed-JS/ sa- DL

Mandatory waste segregation to speed up WTE market development

Waste segregation and recycling systems are pre-

requisite of an efficient and effective WTE market Mandatory segregation of waste is positive for

China’s WTE market Participation from the general public will improve We like China Everbright International (257 HK)

and Canvest (1381 HK)

Taking the right step towards effective waste management. As seen in many countries where the waste-to-energy (WTE) market is well developed, such as Japan, Germany, Switzerland and Denmark, the waste segregation function is also very effective because it would improve burning efficiency and reduce residue. Thus, the recent launch of an action plan for mandatory segregation of municipal waste by the government is positive for the development of WTE market in China. Expect higher participation from the public to drive the plan’s success. Despite the slow progress of waste segregation function in the past, we reckon this new action plan has a better chance of success. The plan targets to have a recycle rate of 35% by 2020. It will start with the commercial and government segments first where monitoring is easier. The plan also requires local governments to formulate detailed plans for the transportation and processing of waste. The establishment of an effective logistic system of waste management, coupled with other incentive systems, will encourage the participation of the general public. After all, environmental protection awareness has been enhanced significantly, with the smoggy weather and growing mountain of trash. Positive for WTE players. We believe the new action plan will speed up the development of the WTE market, as well as the whole value chain, and all players can benefit. The WTE sector has corrected by >10% in the past few weeks due to profit taking, and WTE stocks are now trading at an attractive level. We like China Everbright International (257 HK, TP HK$12.40) on the back of a strong project pipeline and rising capex. We also like Canvest (1381 HK, TP HK$5.20) as its strategic partners and new SOE shareholder will help to speed up deal flow and extend its geographical coverage.

HSI: 25,126

ANALYST Patricia YEUNG +852 2863 8908 patricia_yeung@dbs.com

Recommendation & valuation

Company Pric eT arget

Pric eUpside/

(dow nside) Recom 17FHK $ HK $ PE

China Ev erbright Int'l(257 HK)

10.04 12.40 24 BUY 12.9

Canv est Env .(1381 HK)

4.27 5.20 22 BUY 18.3

Source: Thomson Reuters, DBS Vickers

DBS Group Research . Equity

China / Hong Kong Industry Focus

Waste-to-energy Sector

12 May 2017

Refer to important disclosures at the end of this report

Industry Focus

Waste-to-energy Sector

Page 2

Why is segregation of MSW so important?

Segregation is the fundamental pre-requisite of an effective waste management system. Diverse waste materials require different ways of treatment. As waste is segregated as biodegradable wet waste and inorganic dry waste, biodegradable waste can be treated through landfills or incineration and non-biodegradable waste can be further recycled. In 2000, eight cities in China were selected for trials for municipal solid waste (MSW) segregation, namely Beijing, Shanghai, Nanjing, Hangzhou, Guilin, Guangzhou, Shenzhen and Xiamen. But results have not been significant after >15 years of implementation. While it takes time to increase the awareness and to cultivate the general public into the habit of segregating MSW, the high transient population of these cities, where there is a constant migration of people from other cities, has also made implementation difficult. The low penalty for non-compliance also lacks deterrent power. In addition, other auxiliary facilities, such as logistics of MSW, are not comprehensive which de-motivates the participation from the general public. However, all these will change soon as segregation of MSW will become mandatory.

Mandatory segregation of MSW

In March 2017, National Develop Reform and Commission (NDRC) and Ministry of Housing and Urban-Rural Development jointly issued the first action plan for the mandatory segregation of MSW. The new action plan suggests >90% of MSW has to be segregated with recycle rate of 35% in 46 cities by 2020. It also requires more detailed execution plans (including investment amount, logistic arrangement, more detail categorisation of MSW under the current three major categories) to be issued by the local governments by the end of 2017. The private sector is also encouraged to be involved in the provision of the logistic and auxiliary facilities (from collection, transportation to waste treatment), so that the whole value chain can be more professional. Local governments are required to step up the promotion for segregation of MSW to the general public. In fact, the effectiveness of segregation of MSW will become one of the performance evaluation parameters of government officials. These have demonstrated government’s determination to tighten the execution.

Highlights of the plan

T arget rec y c le rat e 35% by 2020

Cit ies Beijing, Shanghai, Tianjin, Chongqing,Dalian, Qingdao, Ningbo, Xiamen,Shenzhen, prov incial capital cities and firstbatch of demonstration cities

F irs t bat c h o fdemonst rat ionc it ies

Handan (Hebei), Suzhou (J iangsu),Tongling (Anhui), Yichun (J iangxi), Taian(Shandong), Yichang (Hubei), Guangy uan(Sichuan), Dey ang (Sichuan), Shigatse(Tibet), Xiany ang (Shanxi)

O rgan iz at ions Gov ernment organizations, school,publishers, TV stations, airports,transportation stations, shopping malls,hotels, supermarkets, industrial andcommercial buildings

T h ree c at ag o ries o f M SW :Haz ardous w ast e battery , pesticide, medicine, light bulb,

paint, solv ent, etcPerishab le w ast e kitchen waste, v egetables, fruits,

liv estock, poultry , etcRec y lab le w ast e metal, electronics, paper, plastic, fabric,

glass, etc

Source: NDRC, DBS Vickers

In countries such as Japan, Germany, Switzerland and Denmark, the percentage of household waste being treated by WTE is high and the segregation of MSW is also well established and executed. The recycling rate in these countries is also the highest. In fact, an effective segregation system of MSW allows an efficient waste management so that the right type of waste can be treated at the right channel. Thus, a pre-requisite for a prosperous WTE market is a well-developed MSW segregation system and recycling system.

Implementation concerns

While the above plan is certainly on the right path to follow for effective waste management, some may doubt the success of the plan, given that little progress was made in the past. We would like to point out that this plan was slightly different because it starts with the business, commercial and government segments first where execution can be monitored relatively easier. This will make the plan more effective and easier to promote in the residential communities. In addition, the effort in waste segregation in the past was not totally in vain because the habit of segregating MSW is growing, though slowly. For example, the “cash for trash” programme has been promoted in Beijing’s Chaoyang district, where residents are encouraged to exchange kitchen waste for household items, such as toilet paper and soap. After four

Industry Focus

Waste-to-energy Sector

Page 3

years of implementation, around 40% of the residents regularly bring in their waste. The participation from households in a similar programme is also increasing in Chengdu and many other cities. In fact, one of the key reasons for the slow progress in other cities is that the poor logistic arrangement of waste, where government often mix different trash cans together into the trash truck, has discouraged the general public to segregate their waste. Thus, we reckon local governments will formulate plans for transportation and processing of waste, as requested by the new action plan, which will help participation from the public. Coupled with the higher awareness of environmental protection, as a result of the smoggy weather and growing mountains of trash, we believe the new action plan will have a higher chance of being effectively implemented. We reckon that all WTE players will benefit from this new action plan because it will speed up the development of the whole WTE market. In addition, it will also help the development of hazardous waste and kitchen waste markets as these two categories of waste are to be segregated, which will broaden the source of waste for operators. Furthermore, under the new action, WTE players have the opportunities to extend along the value chain into the logistic arrangement of MSW and recycling system.

NIMBY reactions still the major risk

Nevertheless, “Not In My Back Yard” reactions remains the major risk for the WTE sector as site selection is difficult and project execution can be delayed. For instance, there were strong objections to Canvest’s WTE plant in Qingyuan, Guangdong by the local residents recently. They were concerned that the WTE plant, scheduled to be located near a reservoir and coming onstream in late 2018, would pollute the water source and affect the nearby crops. Canvest has already hosted tours for Qingyuan residents to visit its China Scivest plant in Dongguan. It has showcased the technology, state of the art facilities and high emission standards where the amount of dioxin emitted is well below the China government’s requirement. High transparency in the environmental evaluation and public consultation will also alleviate concerns from the residents. Given the Qingyuan plant is one of the key projects under Guangdong government’s 13th Five Year Plan (FYP), we believe the government will step up efforts in educating the general public regarding the WTE industry. We expect the Qingyuan project will continue to proceed although there may be some delays but the impact on Canvest’s earnings is not significant.

Comparison

Treatment Volume

We estimate China Jinjiang Environment (CJE SP) had the largest market share in WTE market in China in 2016 at c.11% in terms of operating capacity. Despite CJE having the largest operating scale, China Everbright International (CEI) (257 HK) had the largest treatment volume in 2016. We estimate CEI had a larger market share of 12.6% in 2016, in terms of treatment volume.

Total portfolio (2016)

0

10,000

20,000

30,000

40,000

50,000

60,000

BJ D

ev

Can

vest

Cap

ital

Envi

r

CEI

Chi

na

Jingj

iang

Dyn

agre

en

Operating capacity Non-operating capacity

tons/day

Source: Companies, DBS Vickers

Estimated market share (2016)

0%

2%

4%

6%

8%

10%

12%

14%

Chi

na

Jingj

iang CEI

Dyn

agre

en

Can

vest

BJ D

ev

Cap

ital

Envi

r

Operating capacity Volume of treated waste

Source: Companies, DBS Vickers

Industry Focus

Waste-to-energy Sector

Page 4

Volume of treated waste

0 1 2 3 4 5 6 7 8 9

10

Beijing Development

Capital Environment

Canvest Dynagreen China Jingjiang China Everbright Int'l

2013 2014 2015 2016

m tons

Source: Companies, DBS Vickers

In addition, we believe CEI had the largest project portfolio, given only >50% of the capacity was still under construction or at the planning stage by end-FY16. Apart from CEI, Canvest (1381 HK) and Dynagreen (1330 HK) also had high percentage of non-operating capacity under their project portfolio. Such a strong order backlog, coupled with high capex, will sustain robust earnings growth with high earnings visibility.

Quality and efficiency

As shown in the chart on the right, Canvest had the best quality of waste which can generate the highest amount of on-grid electricity per ton of waste. Although the amount of on-grid electricity generated per ton of waste is trending down as Canvest is diversifying outside Dongguan, we believe it will still top the list because the heat value of waste in Guangdong is still relatively higher than other regions. Canvest’s strong position in Guangdong province will help sustain the amount of on-grid electricity generated per ton of waste at high level.

On the other hand, CEI and Dynagreen managed to raise the amount of on-grid electricity generated per ton of waste. CEI achieved it through technology advancement and we are optimistic that such trend will continue because of its prolonged effort in R&D and improvement in technical-know-how. Dynagreen was able to secure better quality and sizable projects, pushing up the average efficiency of its WTE plants. We reckon there is room for further improvement if it can add more good quality projects into its portfolio.

China Jinjiang has maintained the amount of on-grid electricity per ton at a relatively low level for a few years. We believe the gap is partly due to the different technology (i.e. fluidised beds) adopted.

On-grid electricity per ton of waste

150

200

250

300

350

400

450

2013 2014 2015 2016

Beijing Development Canvest

Capital Environment China Everbright Int'l

China Jingjiang Dynagreen

kwh/ton

Source: Companies, DBS Vickers

Industry Focus

Waste-to-energy Sector

Page 5

Valuation

WTE stocks have done well so far this year and gained as much as 25%. In particular, Dynagreen gained as much as 45% in the first four months in 2017. Having pulled back >10% from the peak in the past few weeks, the sector performance is in line with HSI YTD.

Share price performance

90

95

100

105

110

115

120

125

130

Jan-17 Feb-17 Mar-17 Apr-17 May-17

WTE * HSI

Rebased 2 Jan 17 = 100)

Source: Thomason Reuters, DBS Vickers

* includes Beijing Enterprises Environment, Canvest, Capital Environment, China Everbright Int’l and Dynagreen

However, we believe the sector will outperform HSI again going forward because it has very strong growth potential. The aggressive target set for WTE sector under the 13th FYP (i.e. 50% of household waste to be treated by WTE by 2020, up from 35% in the 12th FYP) has driven strong demand for new WTE plants. As a result, many WTE players are able to secure more new projects. In particular, CEI’s order backlog has reached a new high, and other players also have a strong project pipeline. As shown in the “Total portfolio (2016)” chart on page 3, most of the capacity under the players’ total portfolio is not operational yet. These will translate into robust growth in construction revenue which subsequently will give rise to strong growth in operating capacity and earnings. After the recent pull back in share price, although Dynagreen still has the lowest valuation, it is still trading at above its historical average PE for the past 18 months. However, Canvest and CEI are trading at around or even below their historical average. We have a BUY rating on CEI as we are optimistic that CEI can sustain its robust earnings growth of 20-30% in FY17/18, on

the back of strong project pipeline and rising capex. Our TP is trimmed to HK$12.40 to reflect the spin-off of its greentech operation. We also have a BUY on Canvest due to our optimism that Canvest will continue to expand its project portfolio. Its strategic partners and an SOE shareholder will open doors to more opportunities in more regions. These will sustain earnings growth at >20% in FY17 and FY18. We have nudged up our TP to HK$5.20 after fine-tuning our sales growth assumption.

Industry Focus

Waste-to-energy Sector

Page 6

Peers valuation

M k t PE PE Y ield Y ield P/Bk P/Bk EV /EBIT DA ROE ROEPrice Cap F iscal 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F

Company Name Code HK $ HK $m Y r x x % % x x x x % %Solid w ast e - Hong K ongCanvest Env .Protc.Group* 1381 HK 4.27 10,484 Dec-16 18.3 15.4 0.8 1.0 2.2 2.0 13.2 11.8 15.0 13.6Dongjiang Env . 'H' 895 HK 12.16 10,788 Dec-13 18.1 14.8 0.9 1.0 2.5 2.1 17.1 13.8 14.8 15.6Dynagreen Env . 1330 HK 4.46 4,661 Dec-16 9.4 8.0 1.8 2.2 1.3 1.2 8.8 7.2 14.9 15.0China Everbright Int'l* 257 HK 10.04 45,006 Dec-16 12.9 10.6 3.1 3.8 2.3 2.0 11.5 10.8 18.8 20.1

14.7 12.2 1.7 2.0 2.1 1.8 12.6 10.9 15.9 16.1

Solid w ast e - Ch inaSound Env .Resources 'A' 000826 CH 31.96 27,303 Dec-16 20.0 15.8 0.5 0.5 2.6 2.2 14.3 11.5 14.8 14.2Zhejiang F fjg.Env .Tmelc. 'A' 002479 CH 11.81 9,405 Dec-16 21.3 16.2 1.0 1.3 2.7 2.3 n.a. n.a. 14.2 15.1Guangxi Bossco Enp.Tech. 'A' 300422 CH 40.1 5,708 Dec-16 39.4 27.3 0.1 0.2 5.0 4.3 30.4 19.9 16.6 19.9Chongqing Water Gp.'A' 601158 CH 7.37 35,376 Dec-16 25.1 24.2 4.2 4.3 2.2 1.9 14.1 13.6 8.0 n.a.Guangdong Chant Gp.'A' 002616 CH 21.14 7,872 Dec-16 32.4 18.6 n.a. n.a. 3.5 3.0 n.a. n.a. 14.3 14.7

27.6 20.4 1.4 1.6 3.2 2.7 n.a. n .a. 13.6 16.0

Source: Thomson Reuters, *DBS Vickers

Industry Focus

Waste-to-energy Sector

Page 7

PE band

Canvest China Everbright Int’l Dynagreen

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Dec

-14

Apr

-15

Aug

-15

Dec

-15

Apr

-16

Aug

-16

Dec

-16

Apr

-17

Aug

-17

Share Price (HK$)

30x

26x

22x

18x

14x

05

1015202530354045

Dec

-05

Jan-

07Fe

b-08

Mar

-09

Apr

-10

May

-11

Jun-

12Ju

l-13

Aug

-14

Sep-

15O

ct-1

6O

ct-1

7

Share Price (HK$)

40x

31x

21x

12x

2x

0

2

4

6

8

10

12

14

16

Jun-

14

Nov

-14

Apr

-15

Sep-

15

Feb-

16

Jul-1

6

Dec

-16

Ma y

-17

Oct

-17

Share Price (HK$)26x

21x

16x

12x

7x

Source: Thomson Reuters, DBS Vickers

PB band

Canvest China Everbright Int’l Dynagreen

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Dec

-14

Apr

-15

Au g

-15

Dec

-15

Apr

-16

Au g

-16

Dec

-16

Apr

-17

Aug

-17

Share Price (HK$)

3.9x

3.3x

2.8x

2.3x

1.8x

0

5

10

15

20

25

30

Dec

-05

Jan-

07Fe

b-08

Mar

-09

Apr

-10

May

-11

Jun-

12Ju

l-13

Aug

-14

Sep-

15O

ct-1

6O

ct-1

7

Share Price (HK$)

5.0x

3.8x

2.7x

1.5x

0.4x0

2

4

6

8

10

12

Jun-

14

Nov

-14

Apr

-15

Sep-

15

Feb-

16

Jul-1

6

Dec

-16

Ma y

-17

Oct

-17

Share Price (HK$)

2.8x

2.3x

1.9x

1.4x

0.9x

Source: Thomson Reuters, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIESed-TH / sa-DL

BUY

Last Traded Price ( 11 May 2017):HK$4.27 (HSI : 25,126) Price Target 12-mth: HK$5.20 (22% upside) (Prev HK$5.10) Potential Catalyst: New project wins Where we differ: We use PE (adjusted for construction revenue) to derive our TP Analyst Patricia YEUNG +852 2863 8908 patricia_yeung@dbs.com

What’s New Two new plants with total capacity of 2,540 tons

per day have already come on stream Another 3,250 tons of daily capacity to become

operational later in FY17 Raise FY17 sales growth assumption by 17ppts for

construction Maintain BUY with higher TP of HK$5.20

Price Relative

Forecasts and Valuation FY Dec (HK$ m) 2015A 2016A 2017F 2018FTurnover 1,185 1,654 2,113 2,426 EBITDA 500 699 893 1,058 Pre-tax Profit 330 463 639 782 Net Profit 272 400 556 680 Net Pft (Pre Ex) (core profit) 272 400 556 680 Net Profit Gth (Pre-ex) (%) 42.3 47.1 38.9 22.5 EPS (HK$) 0.14 0.20 0.23 0.28 Core EPS (HK$) 0.14 0.20 0.23 0.28 EPS Gth (%) 6.8 47.1 16.5 19.0 Core EPS Gth (%) 6.8 47.1 16.5 19.0 Diluted EPS (HK$) 0.14 0.20 0.23 0.28 DPS (HK$) 0.00 0.03 0.03 0.04 BV Per Share (HK$) 1.17 1.34 1.92 2.16 PE (X) 31.4 21.4 18.3 15.4 Core PE (X) 31.4 21.4 18.3 15.4 P/Cash Flow (X) nm nm nm nm P/Free CF (X) nm nm nm nm EV/EBITDA (X) 18.7 14.6 13.2 11.8 Net Div Yield (%) 0.0 0.6 0.8 1.0 P/Book Value (X) 3.7 3.2 2.2 2.0 Net Debt/Equity (X) 0.3 0.6 0.3 0.4 ROAE (%) 11.7 15.8 15.0 13.6 Earnings Rev (%): 8.6 2.5 Consensus EPS (HK$) 0.24 0.29 Other Broker Recs: B: 13 S: 0 H: 0 Source of all data on this page: Company, DBSV, Thomson Reuters, HKEX

Growing from strength to strength More opportunities to come. We maintain our BUY rating on Canvest Environment Protection (Canvest) on optimism that the company will continue to expand its project portfolio. Its strategic partners and an SOE shareholder will open doors to more opportunities in more regions. These will sustain earnings growth at >20% in FY17 and FY18. Total portfolio to reach around 26,000 tons per day in FY17. Management has set a target of around 7,000 tons of new daily capacity in FY17, compared with 4,000-5,000 tons p.a. in the past few years. Although this target is rather aggressive, we believe it is achievable. Firstly, it had already secured two projects in 1QFY17, adding 2,350 tons of new capacity. Secondly, business relationship with its new business partners, such as BOC & UTRUST Private Equity Fund Management and Guangdong Finance Investment, will open doors to more opportunities. In addition, with Shanghai Industrial (363 HK) becoming a substantial shareholder, we expect Canvest to enjoy stronger deal flow and further geographical expansion. If this target is met, total portfolio will increase by 38% to around 26,000 tons per day. Robust construction to expand operating capacity. New projects proceed as planned with Eco-Tech II plant Zhongshan plant coming on stream in April. In addition, construction work of four more plants with total daily treatment capacity of 3,250 tons will complete this year, resulting in a jump in operating daily capacity of 76% to c.14,000 tons in FY17. These will also lead to 27-29% growth in waste treatment volume and on-grid electricity in FY17 and FY18. Given the strong order backlog, we reckon our previous sales growth assumption of just 7% in construction was too conservative and raise it to 24%. Valuation: We have raised our FY17/18 earnings estimates by 3-9%. Despite a small dilution from the conversion of loans by IFC, EPS growth remains robust at high-teens in FY17/18. Our TP is nudged up to HK$5.20, based on 12-month rolling PE (adjusted for construction revenue) of 30x. Maintain BUY. Key Risks to Our View:

High concentration risk in Guangdong province. Although Canvest recently secured a WTE project in Guangxi and Guizhou, most of its projects are located in Guangdong province.

At A Glance Issued Capital (m shrs) 2,455 Mkt. Cap (HK$m/US$m) 10,484 / 1,346

Major Shareholders Lai Chun Tung & family (%) 53.6 Shanghai Industrial Inv. (Hold.) Co. Ltd. (%) 17.5 International Finance Corporation (%) 5.9 AEP Green Power, Limited (%) 5.5

Free Float (%) 17.4 3m Avg. Daily Val. (US$m) 3.3 ICB Industry : Industrials / Support Services

82

102

122

142

162

182

202

222

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Dec-14 Jun-15 Dec-15 Jun-16 Dec-16

Relative IndexHK$

Canvest Environment Protection (LHS) Relative HSI (RHS)

DBS Group Research . Equity 12 May 2017

China / Hong Kong Company Guide

Canvest Environment Protection Version 7 | Bloomberg: 1381 HK Equity | Reuters: 1381.HK Refer to important disclosures at the end of this report

ASIAN INSIGHTS VICKERS SECURITIES

Page 9

Company Guide

Canvest Environment Protection

Key Assumptions

FY Dec 2014A 2015A 2016A 2017F 2018F Volume of treated waste (m tons)

1.4 1.5 2.6 3.3 4.2

Amount of uploaded electricity (m kWH)

525.2 576.5 842.9 1,069.3 1,376.2

Source: Company, DBS Vickers

Segmental Breakdown (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F Revenues (HK$ m) Power sales 349 376 519 687 885 Waste treatment fee 193 205 256 325 418 Construction revenue 248 583 844 1,050 1,062 Finance income 4 20 34 50 61 Total 794 1,185 1,654 2,113 2,426 Source: Company, DBS Vickers

Income Statement (HK$ m) FY Dec 2014A 2015A 2016A 2017F 2018F Revenue 794 1,185 1,654 2,113 2,426 Cost of Goods Sold (452) (745) (1,064) (1,341) (1,484) Gross Profit 342 439 589 772 942 Other Opng (Exp)/Inc (45) (58) (42) (41) (58) Operating Profit 298 381 547 731 883 Other Non Opg (Exp)/Inc 0 0 0 0 0 Associates & JV Inc 0 0 0 0 0 Net Interest (Exp)/Inc (62) (51) (85) (92) (101) Dividend Income 0 0 0 0 0 Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 236 330 463 639 782 Tax (27) (41) (63) (83) (102) Minority Interest (17) (17) 0 0 0 Preference Dividend 0 0 0 0 0 Net Profit 191 272 400 556 680 Net Profit before Except. 191 272 400 556 680 EBITDA 403 500 699 893 1,058 Growth Revenue Gth (%) N/A 49.2 39.6 27.8 14.8 EBITDA Gth (%) N/A 24.2 39.7 27.9 18.5 Opg Profit Gth (%) N/A 28.1 43.6 33.5 20.8 Net Profit Gth (%) N/A 42.3 47.1 38.9 22.5 Margins & Ratio Gross Margins (%) 43.1 37.1 35.6 36.5 38.8 Opg Profit Margin (%) 37.5 32.2 33.1 34.6 36.4 Net Profit Margin (%) 24.1 23.0 24.2 26.3 28.0 ROAE (%) 8.3 11.7 15.8 15.0 13.6 ROA (%) 5.1 6.1 7.6 7.9 7.9

ROCE (%) 7.4 8.4 10.2 10.2 10.1 Div Payout Ratio (%) 0.0 0.0 13.7 15.4 15.0 Net Interest Cover (x) 4.8 7.4 6.5 7.9 8.7 Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

Page 10

Company Guide

Canvest Environment Protection

Interim Income Statement (HK$ m)

FY Dec 2H2014 1H2015 2H2015 1H2016 2H2016 Revenue 481 486 698 670 984 Cost of Goods Sold (304) (298) (448) (423) (642) Gross Profit 177 189 251 248 342 Other Oper. (Exp)/Inc (41) (33) (25) (37) (5) Operating Profit 136 156 226 211 337 Other Non Opg (Exp)/Inc 0 0 0 0 0 Associates & JV Inc 0 0 0 0 0 Net Interest (Exp)/Inc (29) (24) (27) (38) (47) Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 108 131 199 173 290 Tax (16) (14) (27) (19) (44) Minority Interest (16) (17) 0 0 0 Net Profit 75 101 171 154 246 Net profit bef Except. 75 101 171 154 246 Growth Revenue Gth (%) 145.6 55.2 45.3 37.8 40.9 Opg Profit Gth (%) 76.3 (3.6) 65.6 35.6 49.1 Net Profit Gth (%) 30.7 (12.9) 127.2 52.4 43.9 Margins Gross Margins (%) 36.8 38.8 35.9 36.9 34.7 Opg Profit Margins (%) 28.4 32.0 32.3 31.5 34.2 Net Profit Margins (%) 15.7 20.8 24.5 23.0 25.0 Source: Company, DBS Vickers

Balance Sheet (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F Net Fixed Assets 697 1,119 1,342 1,457 1,559 Invts in Associates & JVs 0 0 0 0 0 Other LT Assets 1,504 2,546 3,747 5,252 6,082 Cash & ST Invts 1,335 606 662 528 485 Inventory 1 1 1 42 49 Debtors 105 197 310 496 639 Other Current Assets 127 0 0 317 364

Total Assets 3,768 4,468 6,061 8,092 9,178 ST Debt

253 321 277 307 377 Creditors 213 498 714 912 1,047 Other Current Liab 2 3 13 13 13 LT Debt 776 1,099 2,042 1,866 2,157 Other LT Liabilities 106 212 292 292 292 Shareholder’s Equity 2,315 2,334 2,723 4,703 5,293 Minority Interests 103 0 0 0 0 Total Cap. & Liab. 3,768 4,468 6,061 8,092 9,178 Non-Cash Wkg. Capital 17 (304) (417) (70) (9) Net Cash/(Debt) 306 (814) (1,657) (1,644) (2,049) Debtors Turn (avg days) 48.1 60.7 55.9 69.6 85.4 Creditors Turn (avg days) 224.0 290.4 242.2 251.7 273.1 Inventory Turn (avg days) 0.5 0.3 0.3 6.7 12.7 Asset Turnover (x) 0.2 0.3 0.3 0.3 0.3 Current Ratio (x) 3.3 1.0 1.0 1.1 1.1 Quick Ratio (x) 3.1 1.0 1.0 0.8 0.8 Net Debt/Equity (X) CASH 0.3 0.6 0.3 0.4 Net Debt/Equity ex MI (X) CASH 0.3 0.6 0.3 0.4 Capex to Debt (%) 20.1 50.8 17.7 9.2 7.9 Z-Score (X) NA NA NA NA NA Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

Page 11

Company Guide

Canvest Environment Protection

Cash Flow Statement (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F Pre-Tax Profit 236 330 463 639 782 Dep. & Amort. 105 119 151 162 175 Tax Paid (20) (14) (23) (83) (102) Assoc. & JV Inc/(loss) 0 0 0 0 0 (Pft)/ Loss on disposal of FAs 0 0 0 0 0 Chg in Wkg.Cap. 36 81 158 (346) (61) Other Operating CF (155) (547) (803) (1,341) (806)

Net Operating CF 202 (31) (54) (969) (12) Capital Exp.(net) (207) (721) (410) (200) (200) Other Invts.(net) 0 0 0 0 0 Invts in Assoc. & JV 0 0 0 0 0 Div from Assoc & JV 0 0 0 0 0 Other Investing CF (60) 70 (225) (150) 0 Net Investing CF (267) (651) (635) (350) (200) Div Paid 0 0 0 (33) (91) Chg in Gross Debt (105) 408 857 (104) 361 Capital Issues 1,165 0 111 1,458 0 Other Financing CF 285 (583) (68) (92) (101) Net Financing CF 1,345 (176) 901 1,228 169 Currency Adjustments 0 (21) (42) 0 0 Chg in Cash 1,278 (879) 170 (91) (43) Opg CFPS (HK$) 0.11 (0.06) (0.11) (0.26) 0.02 Free CFPS (HK$) 0.00 (0.38) (0.23) (0.49) (0.09) Source: Company, DBS Vickers

Target Price & Ratings History

Source: DBS Vickers

Analyst: Patricia YEUNG

1

23

4

5

6

7

3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8 5.0

May

-16

Jun

-16

Jul-

16

Aug

-16

Sep

-16

Oct

-16

No

v-1

6

Dec

-16

Jan

-17

Feb-

17

Mar

-17

Ap

r-1

7

May

-17

HK$S.No. Da te Clos ing 12-mth Ra ting

Pric e Ta rge tPri c e

1: 18-May-16 HK$3.53 HK$4.20 Buy2: 22-Aug-16 HK$3.52 HK$4.20 Buy3: 24-Aug-16 HK$3.60 HK$4.20 Buy4: 4-Jan-17 HK$3.92 HK$4.20 Buy5: 16-Feb-17 HK$3.84 HK$4.80 Buy6: 20-Feb-17 HK$3.84 HK$4.35 Buy7: 23-Mar-17 HK$4.58 HK$5.10 Buy

ASIAN INSIGHTS VICKERS SECURITIESed-CK / sa- DL

BUY

Last Traded Price ( 11 May 2017):HK$10.04 (HSI : 25,126) Price Target 12-mth: HK$12.40 (24% upside) (Prev HK$12.80) Potential Catalyst: New project wins Where we differ: We use PE (adjusted for construction revenue) to derive TP Analyst Patricia YEUNG +852 2863 8908 patricia_yeung@dbs.com

What’s New YTD project wins of >Rmb6bn, compared with

Rmb14bn in FY16 Record high capex of >Rmb7bn expected in FY17 Trim earnings estimates by c.4% to reflect the

spin-off of greentech operation Maintain BUY with lower TP of HK$12.40

Price Relative

Forecasts and Valuation FY Dec (HK$ m) 2015A 2016A 2017F 2018FTurnover 8,528 13,971 17,880 20,797 EBITDA 3,702 5,005 6,248 7,538 Pre-tax Profit 3,119 4,099 5,170 6,294 Net Profit 2,085 2,785 3,492 4,248 Net Pft (Pre Ex) (core profit) 2,085 2,785 3,492 4,248

Net Profit Gth (Pre-ex) (%) 22.4 33.6 25.4 21.6 EPS (HK$) 0.46 0.62 0.78 0.95 Core EPS (HK$) 0.46 0.62 0.78 0.95 EPS Gth (%) 22.4 33.6 25.4 21.7 Core EPS Gth (%) 22.4 33.6 25.4 21.7 Diluted EPS (HK$) 0.46 0.62 0.78 0.95 DPS (HK$) 0.19 0.21 0.31 0.38 BV Per Share (HK$) 3.84 3.88 4.40 5.01 PE (X) 21.6 16.2 12.9 10.6 Core PE (X) 21.6 16.2 12.9 10.6 P/Cash Flow (X) nm 204.0 nm nm P/Free CF (X) nm nm nm nm EV/EBITDA (X) 15.4 12.5 11.5 10.8 Net Div Yield (%) 1.8 2.0 3.1 3.8 P/Book Value (X) 2.6 2.6 2.3 2.0 Net Debt/Equity (X) 0.5 0.8 0.8 1.1 ROAE (%) 12.1 16.1 18.8 20.1 Earnings Rev (%): (4) (4) Consensus EPS (HK$) 0.76 0.91 Other Broker Recs: B: 21 S: 0 H: 2 Source of all data on this page: Company, DBSV, Thomson Reuters, HKEX

Rising profits Strong growth momentum continues. We maintain our BUY rating on China Everbright International (CEI). We are optimistic that CEI can sustain its robust earnings growth of 20-30% in FY17/18, on the back of strong project pipeline and rising capex. Record-high order backlog to support rising capex. Thanks to the first urban-rural integration water supply project secured in Shandong (total investment of Rmb3.1bn), CEI’s project win already amounted to >Rmb6bn in the first four months of FY17, compared with Rmb14.1bn in FY16. Such strong deal flow will push the order backlog to record-high levels again. Also, construction of some major projects will be completed in FY17 or early FY18, i.e. the Zhenjiang sponge city project (total investment of >Rmb2bn) and Hangzhou Yuhang WTE project (Rmb1.8bn). We expect capex in FY17 to exceed FY16’s Rmb7bn, leading to 33% rise in construction revenue. Plus, there are 16 WTE projects, four waste water projects and eight greentech projects to be commissioned in FY17. Coupled with the full-year impact from newly completed projects in FY16, we estimate 13%, 30% and 60% volume growth for treated waste water, electricity generated in WTE and greentech operations respectively. Operating revenue should rise 30-40% for waste-to-energy and greentech operations in FY17. Rising efficiency. We expect profitability and project efficiency to continue to improve, as CEI is strengthening its technology-related R&D and innovation. This is reflected in the uptrend in ROE (from 15.5% in FY12 to 16.1% in FY16) and the rising amount of on-grid electricity generated per ton of waste in WTE (from 214.2kWh in FY11 to 276.8kWh in FY16). In fact, the recent new projects (Boluo project in Guangdong and Wujiang project in Jiangsu) are able to achieve even higher amount of on-grid electricity per ton of over 500kWh. One of the reasons for such higher amount of on-grid electricity is that the grate furnace used for these plants were developed and manufactured by CEI. These facilities have been modified specifically for the China market where household waste has relatively higher moisture content, so that incineration can be more effective. Valuation: We have revised down FY17/18F earnings by c.4% to reflect the spin-off of its greentech operation. We trim our TP to HK$12.40 which is based on the target valuation of China Everbright Water (CEWL SP, S$0.64 TP), 23x and 18x 12-month rolling adjusted PE for waste-to-energy and greentech operations respectively, with earnings from construction revenue excluded. Key Risks to Our View:

Slower-than-expected construction progress, fewer-than-expected project wins and reduction in feed-in-tariff will lead to lower earnings growth.

At A Glance Issued Capital (m shrs) 4,483 Mkt. Cap (HK$m/US$m) 45,006 / 5,778

Major Shareholders China Everbright Hldgs (%) 41.4 RRJ Capital Master Fund II, L.P. (%) 7.9

Free Float (%) 50.8 3m Avg. Daily Val. (US$m) 14.3 ICB Industry : Industrials / Support Services

85

105

125

145

165

185

205

225

4.8

6.8

8.8

10.8

12.8

14.8

16.8

May-13 May-14 May-15 May-16 May-17

Relative IndexHK$

China Everbright Intl (LHS) Relative HSI (RHS)

DBS Group Research . Equity 12 May 2017

China / Hong Kong Company Guide

China Everbright Intl Version 8 | Bloomberg: 257 HK EQUITY | Reuters: 0257.HK

Refer to important disclosures at the end of this report

ASIAN INSIGHTS VICKERS SECURITIES

Page 13

Company Guide

China Everbright Intl

Key Assumptions

FY Dec 2014A 2015A 2016A 2017F 2018F Volume of treated sewage (m tons)

584.8 899.2 1,148.3 1,297.6 1,427.3

Volume of waste processed ('000 tons)

5.4 7.0 9.0 10.8 13.6

Amount of uploaded electricity (m kWH) 1,389.8 1,883.2 2,473.1 3,017.2 3,831.8

Source: Company, DBS Vickers

Segmental Breakdown (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F Revenues (HK$ m) Environmental Energy 4,202 5,401 7,905 10,427 12,324 Environmental Water 1,051 1,815 2,494 2,994 3,522 Greentech 1,094 1,178 3,026 3,803 4,165 Others 8 135 546 655 786 Total 6,355 8,528 13,971 17,880 20,797 Segmental profit (HK$ m) Environmental Energy 2,033 2,670 3,300 2,854 3,448 Environmental Water 571 796 844 975 1,159 Greentech 378 437 1,020 854 1,126 Others 0 N/A N/A 0 0 Total 2,987 3,903 5,164 4,683 5,733 Segmental profit Margins (%) Environmental Energy 48.4 49.4 41.7 27.4 28.0 Environmental Water 54.3 43.9 33.8 32.6 32.9 Greentech 34.6 37.1 33.7 22.5 27.0 Others 0.0 0.0 0.0 0.0 0.0 Total 47.0 45.8 37.0 26.2 27.6 Source: Company, DBS Vickers

Income Statement (HK$ m) FY Dec 2014A 2015A 2016A 2017F 2018F Revenue 6,355 8,528 13,971 17,880 20,797 Cost of Goods Sold (3,387) (4,626) (8,662) (10,985) (12,594) Gross Profit 2,969 3,903 5,310 6,894 8,203 Other Opng (Exp)/Inc (351) (378) (681) (1,059) (1,114) Operating Profit 2,618 3,524 4,629 5,835 7,089 Other Non Opg (Exp)/Inc 0 0 0 0 0 Associates & JV Inc (1) (6) 63 75 83 Net Interest (Exp)/Inc (318) (400) (593) (741) (879) Dividend Income 0 0 0 0 0 Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 2,299 3,119 4,099 5,170 6,294 Tax (534) (783) (1,062) (1,344) (1,636) Minority Interest (62) (251) (252) (333) (409) Preference Dividend 0 0 0 0 0 Net Profit 1,703 2,085 2,785 3,492 4,248 Net Profit before Except. 1,703 2,085 2,785 3,492 4,248 EBITDA 2,733 3,702 5,005 6,248 7,538 Growth Revenue Gth (%) 19.5 34.2 63.8 28.0 16.3 EBITDA Gth (%) 24.8 35.5 35.2 24.8 20.6 Opg Profit Gth (%) 24.7 34.6 31.3 26.1 21.5 Net Profit Gth (%) 28.6 22.4 33.6 25.4 21.6 Margins & Ratio Gross Margins (%) 46.7 45.8 38.0 38.6 39.4 Opg Profit Margin (%) 41.2 41.3 33.1 32.6 34.1 Net Profit Margin (%) 26.8 24.4 19.9 19.5 20.4 ROAE (%) 10.5 12.1 16.1 18.8 20.1 ROA (%) 5.5 5.1 6.2 6.3 6.2

ROCE (%) 7.0 7.0 8.3 8.6 8.5 Div Payout Ratio (%) 29.0 39.8 33.0 40.0 40.0 Net Interest Cover (x) 8.2 8.8 7.8 7.9 8.1 Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

Page 14

Company Guide

China Everbright Intl

Interim Income Statement (HK$ m)

FY Dec 2H2014 1H2015 2H2015 1H2016 2H2016 Revenue 3,411 3,769 4,765 5,421 8,551 Cost of Goods Sold (1,794) (1,972) (2,654) (3,168) (5,494) Gross Profit 1,617 1,797 2,111 2,253 3,057 Other Oper. (Exp)/Inc (187) (104) (229) (208) (347) Operating Profit 1,430 1,694 1,883 2,045 2,710 Other Non Opg (Exp)/Inc 0 0 0 0 0 Associates & JV Inc (1) 0 (6) 24 39 Net Interest (Exp)/Inc (210) (224) (228) (300) (339) Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 1,219 1,470 1,649 1,769 2,410 Tax (291) (367) (417) (471) (592) Minority Interest (27) (103) (148) (89) (163) Net Profit 901 1,000 1,085 1,209 1,655 Net profit bef Except. 901 1,000 1,085 1,209 1,655 Growth Revenue Gth (%) 19.6 28.0 39.7 43.8 79.4 Opg Profit Gth (%) 30.8 35.5 31.6 20.7 44.0 Net Profit Gth (%) 33.6 24.7 20.4 20.9 52.6 Margins Gross Margins (%) 47.4 47.7 44.3 41.6 35.7 Opg Profit Margins (%) 41.9 44.9 39.5 37.7 31.7 Net Profit Margins (%) 26.4 26.5 22.8 22.3 19.4 Source: Company, DBS Vickers

Balance Sheet (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F Net Fixed Assets 1,720 2,667 3,339 3,451 3,485 Invts in Associates & JVs 282 449 573 649 732 Other LT Assets 20,712 26,019 33,313 45,093 58,072 Cash & ST Invts 4,094 5,954 6,341 6,258 5,199 Inventory 118 202 362 358 416 Debtors 3,220 4,612 4,908 5,645 6,372 Other Current Assets 1,056 720 697 536 624

Total Assets 31,200 40,623 49,532 61,989 74,899 ST Debt

2,611 3,410 4,412 4,462 4,496 Creditors 2,318 2,838 4,898 6,268 7,291 Other Current Liab 68 119 98 98 98 LT Debt 6,525 12,411 17,204 22,557 31,271 Other LT Liabilities 1,834 2,425 3,076 3,076 3,076 Shareholder’s Equity 16,263 17,196 17,389 19,740 22,470 Minority Interests 1,580 2,224 2,456 5,789 6,199 Total Cap. & Liab. 31,200 40,623 49,532 61,989 74,899 Non-Cash Wkg. Capital 2,007 2,577 971 173 24 Net Cash/(Debt) (5,042) (9,867) (15,275) (20,761) (30,568) Debtors Turn (avg days) 184.9 197.4 124.4 107.7 105.4 Creditors Turn (avg days) 258.7 233.2 169.1 191.4 202.3 Inventory Turn (avg days) 13.1 16.6 12.3 12.3 11.5 Asset Turnover (x) 0.2 0.2 0.3 0.3 0.3 Current Ratio (x) 1.7 1.8 1.3 1.2 1.1 Quick Ratio (x) 1.5 1.7 1.2 1.1 1.0 Net Debt/Equity (X) 0.3 0.5 0.8 0.8 1.1 Net Debt/Equity ex MI (X) 0.3 0.6 0.9 1.1 1.4 Capex to Debt (%) 11.9 6.8 14.6 1.1 0.7 Z-Score (X) 2.9 2.2 2.0 1.8 1.6 Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

Page 15

Company Guide

China Everbright Intl

Cash Flow Statement (HK$ m)

FY Dec 2014A 2015A 2016A 2017F 2018F Pre-Tax Profit 2,299 3,119 4,099 5,170 6,294 Dep. & Amort. 116 184 313 337 366 Tax Paid (173) (217) (335) (1,344) (1,636) Assoc. & JV Inc/(loss) 1 6 (63) (75) (83) (Pft)/ Loss on disposal of FAs 0 1 11 0 0 Chg in Wkg.Cap. (2,676) (4,839) (4,330) (11,132) (12,979) Other Operating CF 312 208 525 741 879

Net Operating CF (123) (1,538) 221 (6,304) (7,160) Capital Exp.(net) (1,086) (1,082) (3,157) (300) (250) Other Invts.(net) 0 0 0 0 0 Invts in Assoc. & JV (28) (186) (98) 0 0 Div from Assoc & JV 0 0 0 0 0 Other Investing CF 675 (1,408) (981) 0 0 Net Investing CF (439) (2,676) (4,236) (300) (250) Div Paid (448) (560) (906) (1,142) (1,518) Chg in Gross Debt 1,187 6,793 6,220 5,403 8,748 Capital Issues 0 0 (8) 0 0 Other Financing CF (456) (29) (592) 2,259 (879) Net Financing CF 283 6,204 4,713 6,521 6,352 Currency Adjustments (53) (130) (311) 0 0 Chg in Cash (332) 1,859 387 (83) (1,059) Opg CFPS (HK$) 0.57 0.74 1.02 1.08 1.30 Free CFPS (HK$) (0.27) (0.58) (0.65) (1.47) (1.65) Source: Company, DBS Vickers

Target Price & Ratings History

Source: DBS Vickers

Analyst: Patricia YEUNG

1

23

4

5

6 7

8 910

7.0 7.5 8.0 8.5 9.0 9.5

10.0 10.5 11.0 11.5 12.0

May

-16

Jun

-16

Jul-1

6

Au

g-16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan

-17

Feb

-17

Mar

-17

Apr

-17

May

-17

HK$S.No. Da te Clos ing 12-mth Ra ting

Pric e Ta rge tPri c e

1: 20-May-16 HK$7.76 HK$10.20 Buy2: 23-May-16 HK$7.95 HK$10.20 Buy3: 27-May-16 HK$7.99 HK$10.20 Buy4: 15-Jun-16 HK$8.29 HK$10.20 Buy5: 5-Jul-16 HK$8.59 HK$10.20 Buy6: 8-Jul-16 HK$8.33 HK$10.20 Buy7: 12-Aug-16 HK$8.69 HK$10.20 Buy8: 16-Aug-16 HK$9.05 HK$10.30 Buy9: 3-Nov-16 HK$9.18 HK$11.50 Buy10: 1-Mar-17 HK$10.06 HK$12.80 Buy

Industry Focus

Waste-to-energy Sector

Page 16

DBSVHK recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends Completed Date: 12 May 2017 14:28:17 (HKT) Dissemination Date: 12 May 2017 16:07:03 (HKT)

Sources for all charts and tables are DBS Vickers unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers (Hong Kong) Limited (“DBSVHK”). This report is solely intended for the clients of DBS Bank Ltd., DBS Vickers Securities (Singapore) Pte Ltd. (“DBSVS”) and DBSVHK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVHK. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., DBSVS and DBSVHK, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

Industry Focus

Waste-to-energy Sector

Page 17

ANALYST CERTIFICATION

The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the

companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her

compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)

primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the

issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real

estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the

management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or

his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has

procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of

research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment

banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment

banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the

DBS Group. COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBSVHK and its subsidiaries do not have a proprietary position in the securities recommended/mentioned in this report as of 11 May

2017.

2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

3. Compensation for investment banking services: DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

4. Disclosure of previous investment recommendation produced: DBS Bank Ltd, DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the

trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

Industry Focus

Waste-to-energy Sector

Page 18

RESTRICTIONS ON DISTRIBUTION

General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

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United Kingdom

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