CNA Group (CNA SP) NOT RATED

Investment Highlights

 A potential new growth driver? CNA has announced a JV agreement with China?s state-owned enterprise SPACE-ONE to tap into China?s growing smart connected city market. More than 120 smart-city related initiatives have been launched by China government agencies, with 37 prefecture-level cities, 50 counties and 3 townships marked as potential smart cities in the next 3-7 years. With its pilot project in the pipeline, a successful implementation may present huge growth potential for CNA. While we are upbeat on the possible growth prospects of CNA, we remain cautious on the implementation risks that come with the venture.

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14.7%.Significant war chest. After its recent capital raising, the group will have a cash position of about S$15.2m with a net debt/asset ratio of

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subscribed to 35m new shares of CNA each at S$0.179/share and S$0.19/share. After the recent new share placement, Mitsui and MEAP

will each hold 9.52% in CNA. Capitalising on its strategic investors? network, CNA has been open to multiple business opportunities.Two of Japan?s listed MNCs are strategic investors. In 2011, Mitsui & Co. Ltd (Mitsui) and Mitsubishi Electric Asia Pte Ltd (MEAP)

 Comeback in 4Q13 with contributions from recurring income.

China has been a recent drag on earnings with delays in the construction of Dongying (DY) waste water treatment plant. With the

completion of DY in 3Q, losses from China operations are expected to be curbed and start contributing positively to CNA?s earnings in 4Q13.

Phase 1 of DY is expected to have a treatment capacity of 30,000mt/day, and CNA is expected to start receiving water tariffs from

DY in 4Q13.

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projects like common use terminal equipment solution in Luang Prabang Airport in Laos, and installation of CNA?s local sequential

controller systems in India Metro railway project and 16 of Singapore?s Downtown line underground MRT stations. CNA?s announced Thailand

projects, which include the real estate development in Sriracha, Thailand with Tokyo-listed TamaHome, are expected to translate into

another S$80m of new orders once contracts are finalised in 3Q13.A good 2013. 2013 has been a good year for CNA, as it secured S$13.8m worth of projects in 1H13 across Asia, which includes key

Price Chart

Source: Bloomberg

Analyst

Loke Chunying

+65 6590 6637

[email protected]

Key Financials

Year to 31 Dec (S$m) 2010 2011 2012

Net Turnover 83.3 100.1 78.3

EBITDA 0.4 6.5 (1.1)

EBIT (0.8) 5.3 (2.1)

PATMI (22.7) 3.3 (3.2)

EPS (cts) (11.41) 1.28 (1.17)

P/E (x) - 18.4 -

P/B (x) 1.1 1.1 1.2

Dividend Yield (%) 6.4 - -

PATMI Margin (%) (27.3) 3.3 (4.0)

Net Gearing (%) - 50.4 56.4

Interest cover (x) (0.1) 2.4 (1.6)

ROE (%) (39.5) 6.3 (5.6)

Source: Bloomberg, UOB Kay Hian