Beijing Enterprises Water Group (SEHK:371): Valuation Check After RMB2 Billion Note Issuance and Debt Refinancing

Beijing Enterprises Water Group (SEHK:371) has just wrapped up a RMB 2 billion medium term note issuance, using the fresh funding to refinance offshore loans and streamline its debt profile for the years ahead.

See our latest analysis for Beijing Enterprises Water Group.

The funding move lands as the HK$2.59 share price grinds higher, with a solid year to date share price return and an even stronger one year total shareholder return hinting that investors are slowly rewarding steadier balance sheet progress.

If this kind of balance sheet housekeeping has you thinking more broadly about where to deploy capital next, it could be worth exploring fast growing stocks with high insider ownership.

With debt costs locked in at low rates and the shares still trading below analyst targets and intrinsic value estimates, the key question now is whether Beijing Enterprises Water is undervalued or already pricing in future growth.

Price to Earnings of 17.6x: Is it justified?

Beijing Enterprises Water Group trades at HK$2.59, but its 17.6x price to earnings multiple suggests the market is paying a premium versus peers.

The price to earnings ratio compares what investors pay today to each unit of current earnings, a key gauge for mature utilities with steady but modest growth. For a regulated, capital intensive water business, this multiple reflects how optimistic investors are about future profitability and cash generation.

In this case, the 17.6x price to earnings ratio stands well above both the Asian water utilities average of 14.8x and the peer average of 9.3x, implying the market is assigning Beijing Enterprises Water a much richer earnings valuation than comparable companies. Relative to the estimated fair price to earnings ratio of 10.4x, the current level also looks stretched, suggesting there could be room for the multiple to move closer to that fair level if expectations change.

Explore the SWS fair ratio for Beijing Enterprises Water Group

Result: Price to Earnings of 17.6x (OVERVALUED)

However, slower revenue growth and ongoing capital intensity could pressure margins and challenge the premium valuation if execution or project returns disappoint.

Find out about the key risks to this Beijing Enterprises Water Group narrative.

Another View on Value

While the 17.6x price to earnings ratio looks rich, our DCF model paints a different picture, suggesting fair value closer to HK$6.91, which is well above the current HK$2.59 share price. If the cash flow assumptions hold, is the market being too cautious?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Beijing Enterprises Water Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 927 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Beijing Enterprises Water Group Narrative

If you see the numbers differently or want to stress test your own assumptions, you can put together a custom view in just minutes: Do it your way.

A great starting point for your Beijing Enterprises Water Group research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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