Jarick Seet of Maybank Securities (Maybank) sees water and waste project developer Sanli Environmental (Sanli) prospects to be &ldquo even brighter&rdquo following a non-deal roadshow (NDR) held with the group&rsquo s management on Sept 4.

 

Presently, Sanli has a tender book valued between $600 million and $800 million. The group is actively bidding for several projects, including the $205 million Public Utilities Board (PUB) Changi NEWater Facility 3.

 

&ldquo We anticipate tender results worth $300 million to $500 million to be announced by the end of November. These potential wins could significantly increase Sanli&rsquo s orderbook from $333 million to a range of $600 million to $800 million,&rdquo writes Seet.

 

He believes Sanli has a &ldquo strong likelihood&rdquo of securing at least $200 million to $300 million of these orders, thus nearly doubling its current orderbook. He adds: &ldquo Such outcome would serve as a significant catalyst for Sanli&rsquo s growth trajectory.&rdquo

 

Following the Covid-19 pandemic, elevated raw material and labour costs compressed the group&rsquo s margins in the FY2024 and FY2025. Seet anticipates a recovery in margins, particularly in the group&rsquo s Engineering, Procurement and Construction segment, as new contracts with improved margins commence in FY2026.

 

He writes: &ldquo Additionally, supported by a robust orderbook of $333 million as of July 10, we project revenue growth of 10% to 15% y-o-y for the next 2 years.&rdquo

 

Overall, Seet sees that the group is well-positioned for sustained growth from FY2026 to FY2036, driven by PUB water-related projects and the anticipated Long Island tenders.

 

Sanli is also &ldquo among the few&rdquo local companies with specialised polder expertise, as evidenced by its successful completion of its first polder project at Pulau Tekong. A polder is a tract of land that lies below sea level and is reclaimed from the ocean, lakes, rivers or wetlands through the building of dykes, drainage canals and pumping stations.

 

&ldquo This positions Sanli favourably to capitalise on the upcoming Long Island project, estimated at $100 billion, enhancing its growth prospects in the sector,&rdquo notes Seet.

 

With this, he has kept his &ldquo buy&rdquo call and target price of 38 cents on the group.

 

He adds that successfully securing a portion of these projects could &ldquo establish a multi-year growth trajectory&rdquo for Sanli.

 

Additionally, Sanli is also looking at new revenue streams, such as its magnesium hydroxide business and prequalification to provide water cooling and maintenance systems for a data centre in Johor, Malaysia.

 

&ldquo We expect these initiatives to further diversify and strengthen Sanli&rsquo s revenue base,&rdquo writes the analyst.

 

Upside factors noted by him include contract wins from PUB, a new record orderbook and a rebound in margins in FY2026. Along with this, increasing dividends, new business segments to boost margins and new areas for growth and a potential takeover target by bigger regional players could also drive Sanli&rsquo s share price.

 

On the other hand, downside risks include project execution risks, lower margins from PUB projects, high cash flow needs for projects which could strain Sanli&rsquo s balance sheet and labour and rising dormitory costs. Missing out on tenders resulting in lower revenues could also hurt the stock&rsquo s valuation, as will aggressive bidding, which could result in lower margins and profitability.