Saturday, August 20, 2005
China Evergreen (CEEC) Announcement
Announcement
Completion of a 20,000 ton/day waste treatment plant as a BOT. Total investment was $3.6 million. Lifetime is 22 years. Expected revenue: $600K to $650K per year. If we estimate the costs of running the plant at $100K per year and the revenue is at the lower end of the scale, then doing a DCF, the return exactly matches the investment at a discount rate of 13.1%. The company is selling for at least 2x book value. They aren't using much leverage (the leverage now comes from what seems to be temporary effects). So if return on assets are generally in the 13% range, then this doesn't look great for owning the stock.
UPDATE Aug 23: And so the stock goes up 40% in one day. Oh well.
Completion of a 20,000 ton/day waste treatment plant as a BOT. Total investment was $3.6 million. Lifetime is 22 years. Expected revenue: $600K to $650K per year. If we estimate the costs of running the plant at $100K per year and the revenue is at the lower end of the scale, then doing a DCF, the return exactly matches the investment at a discount rate of 13.1%. The company is selling for at least 2x book value. They aren't using much leverage (the leverage now comes from what seems to be temporary effects). So if return on assets are generally in the 13% range, then this doesn't look great for owning the stock.
UPDATE Aug 23: And so the stock goes up 40% in one day. Oh well.
// posted by Bruce @ 8:30 PM 
