Much like a phoenix rising from its ashes, HanKore Environment Technology Group has shed off its old shell, Bio-Treat Technology, and is now raring to soar. Not only was the name changed from Bio-Treat to HanKore in May 2011, a new management has taken over, led by the present executive chairman, David Chen.
Chen first became involved in the company in December 2009 when his investment vehicle, Giant Delight, pumped in about $70.6 million to restructure the company. More than 60 percent of the money was used to pay off the outstanding debt from the Bio-Treat’s convertible bonds legacy, and the remaining used as working capital and capital expenditure.
Chen brought a well of industry experience to the company. Before joining HanKore, he had founded and headed Beijing Revolution Science and Technology, a leading environmental protection and wastewater treatment solutions provider with over 30 types of water treatment technologies.
Besides a new management, new investors also came aboard. Amongst them are SGX-listed Boustead, Suzhou Venture Group (invested through Huayuan), Dezhou Capital (invested through Firstree), and Ancient Jade Capital.
Suzhou Venture Group is a sovereign angel investor with access to much resources and brand influence in the PRC. Dezhou Capital is a major shareholder for nine companies listed in China, of which two are water treatment companies (Xinrong and Hongcheng Water). Ancient Jade’s founder, Lin Zhe Ying, was a deputy director at the PRC Ministry of Commerce and a key official representing China in its negotiations over World Trade Organisation’s rules in commercialising the water treatment sector.
Chen shared, “Dezhou Capital made the decision to invest in us soon after it inspected our plants and business.” Chen believes that the company’s assets of water treatment projects and plants and its high standards in managing water treatment plants attracted these shareholders.
HanKore's high standards in managing water treatment plants attracted shareholders
These new anchor shareholders will provide a strong network and the necessary expertise for the company to expand in China. The funds brought in by these new shareholders have already helped the company to complete its capital restructuring last year and the company has cleared the debt of the US$206 million convertible bond of its predecessor, Bio-Treat. As a result, its balance sheet has improved greatly with an improved gearing.
Chen added, “Water is a resource that will become scarcer while water treatment is an industry with high barriers of entry. With the strong internal management, we are now able to match the state of development of this industry in PRC.”
The company sees a golden era of growth in China’s water sector in the next five to ten years. On this firm belief, HanKore aims to triple its water treatment capacity in three years, and to further increase its capacity by five-fold in five years.
HanKore’s new management has already started to pave the way to achieve these bold targets, having progressed into the next phases of several of their projects.
In January 2012, it went into a second collaboration with Sanmenxia Industrial Park on a Build-Own-Operate contract, which involves a water supply project with a capacity of 150,000 tons per day. In February 2012, it commenced a Build-Own-Transfer project in Liquan County with a total wastewater treatment capacity of 60,000 tons per day as well as the second phase project of the wastewater treatment plant in Xianyang, doubling the treatment capacity to 200,000 tons per day.
With the phenomenal progress it made in such short time, HanKore was duly awarded the “No. 2” in PRC’s 2011 Water Industry in the Top Ten New Achiever Enterprise Award category, presented by ChinaWaterNet (www.h20-china.com), the most influential and the most authoritative cyber media in the water industry in China. Interestingly, HanKore was ranked above a PRC subsidiary of Sembcorp, which stood at tenth position in the same award category.
HanKore won No. 2 in PRC's 2011 Water Industry Top 10 New Achiever Enterprise Award
The company has also made a turnaround in its financial results. Revenue for its first half of its financial year ending 30 June 2012 surged 40 percent year on year while the net profit improved 26 percent!
With its improved performance and achievement, the investment community has started to take a second look at the company. However, beyond the historical baggage from Bio-Treat, there are still some concerns.
The recent company results showed certain impairments, write-offs and other exceptional items. Investors are concerned of the scale of such items and wonder if they will still be present in subsequent quarters and for how long they will last.
Astute investors have identified that the company’s cash seems to be depleting and net cash from operating activities has not shown significant improvement, suggesting that the company seems in need to raise further funds to address its debts.
Being more wary of S-chips generally, Singaporean investors would look forward to HanKore displaying a higher corporate disclosure standard and degree of transparency so that they can better understand the specifics of those impairments along with the facts and circumstances surrounding them.
Ultimately, to regain the belief from investors whose confidence was lost by the previous Bio-Treat, HanKore has more to do in terms of providing honest assessments of the direction and risks the company faces so as to convince investors it has a viable roadmap to reach the bold targets it has set, and to be the rising phoenix it aspires to be.