Sound Global's (SG) 4Q10 earnings leapt 76.1% YoY, which was in line with our estimates. This was attributable to a 65.9% YoY surge in revenue. While we remain confident of order books' sustainability, we reduced our FY11 earnings by 9.5% to factor in higher expenses. After factoring in the maximum dilutive impact of its convertible bonds, our TP is revised to S$0.78, based on 14x FY11 earnings – at least a 40% discount to its China peers. Maintain BUY on strong demand for waste water treatment in China, as well as the company's continued focus on investing in BOT projects, which provides stable, recurring steams of revenue.
4Q10 earnings within expectations. SG's earnings came in at RMB108.8m for the quarter, up 76.1% YoY, on the back of a 65.9% YoY surge in revenue. 4Q10 revenue hit RMB550.3m, boosted by contribution from the Saudi Arabia project, as well as higher contributions from the Manufacturing (higher sales from customised equipment), Turnkey Services and Operation and Maintenance (O&M) segments.
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