 Good day, fellow investors. I have been researching Chinese stocks, especially those traded in Hong Kong, but also on the New York Stock Exchange. Over the last week, I have looked at more than 50 of them, selected a few that I am digging deeper, and I want to share one that looks promising with you today. The company's Beijing Enterprises Water, that deals with water treatment. Sewage, shit. So it is not really hot. Oh, well, it is hot. Well, it isn't something that attracts a lot of investors, like tech, but it is a growth story. It has positive tailwinds. It's extremely cheap. The price earnings ratio is seven. The dividend yield is 5% constantly growing. So a very, very interesting stock. And if you are a global investor, you will be very interested to this. If you are not a global investor, if you only invest in domicile stocks, wherever you might live, then you might also see, okay, this is where I invest, but let's see what is there out in the world just to compare your holdings, the risk and reward to this ones. So stick to this video. It will be very interesting, entertaining, value-adding, because I spent a lot of time to do this research, and please click that like button. It matters a lot to me for the YouTube algorithm. Subscribe, comment, ask whatever you want in the comments, and let's go into the analysis. When I analyze a stock, I do a business overview. I do a sector overview that tells me whether it is a sector with tailwinds or headwinds. I prefer tailwinds when I invest, because even if I miss something when it comes to a business or it isn't as good as I thought, if there are tailwinds, the risk is much, much lower. Then I'll give you a few notes from the annual and interim reports that I go through each time that I look at something, what's catching my eye, what are the most important things, we'll analyze the financials, how the financials relate to the business model, and then conclude with an investment conclusion that you can use and compare to all the other holdings that you have the risk and the reward and see whether Beijing Enterprises Water is something better than you might have and something you wish to own for the long term. So let's immediately start with the business overview. All right, the business is very simple. As I said, water treatment, sewage, then they turn it, whatever, they have plants all across China, more than 971 plants, and the number of those plants is growing. They're investing a lot into new plants, new projects. So it is a growth story and it is a growth story that will continue into the future as many old plants are rebuilt, refurbished, and there is simply a lot of work for the company. The strategic target the company has is very, very interesting and very, very exuberant, but if they hit just 50% of their target, it will be a great, great story. And they did extremely well over the past, revenue tripled over the last five years, and their target is to continue to grow, to reach assets for 1 trillion renminbi from the current 130 billion market value doubled on the current even more, profits of 10 billion, and they want to expand into 100 countries from the current seven. So if the management continues to deliver on what they are doing, this will be a great, great investment story. And if you take it from a perspective, okay, Hong Kong, China, unlooked, unloved utilities, sewage treatment, water treatment related to the Chinese government, but very ambitious. And I'm looking at what the Chinese companies are doing in Europe. They are building infrastructure paid by the European government because they are the lowest bidders, they make profit on that, and they have great building technologies. So if they can scale what they did in China globally, and I have seen the financials on the overseas business, the six projects they have, they have 40 million Hong Kong dollars in profit on 130 million of revenues. So that's a pretty, pretty great net profit margins. And therefore it's very interesting to watch and follow how this company develops. What I'm looking at, I'm looking for companies that will do great over the next 10, 20 years, companies that I can buy cheaply and then simply see them grow over the long term. Beijing Water Enterprises, Beijing Enterprises Water has a lot of such potential. And therefore I'm putting it on my watch list. Structure on the company, it's owned by the government, the government owns 41% of the company. Then they have some other companies, clean energy group limited the day on 30%. But it's most about the environmental group, the water treatment plants, the sewage treatment plants, the construction of those water businesses and plants where they also make profits. They have different business models, somewhere they built it, operate and then transfer to the owner. And all in all, very interesting in a positive business environment. This is what it looks like. So just one example of water service project in Binzhou, I probably said that wrongly, about 937 water plants, 171 sewage treatment plants, water distribution plants, reclaimed water treatment plants, even desalinization. And renovation projects going on, a lot of investments coming, a huge backlog that will require a lot of capital in the future. However, talking about that capital, they are transitioning from a high capital intensive business to an asset light business. What does this mean? Now their business model is made in a way that they invest the money, they build the plants, and then they have receivables from the customer, usually the municipality, for a long, long term. So it's a very capital intensive business, therefore they have a lot of debt, but they are now selling stakes in those businesses, and they recently sold the stake, 40% stake in the business for 1.7 book value. The current book value, if you buy the stock is 1.1 something. So they sold that to an asset management business that bought 40%, so they are deleveraging, and they will try to sell more and more stakes in their businesses in order to deleverage and allow for future more growth. So it's a transition that they are starting if they are successful with the transition. It could re-rate the stock from the current price earnings ratio of seven, and that's something we're going to discuss in the investment conclusion. From a business perspective, 32% of revenue comes from water treatment, 9% from selling equipment, 12% from water distribution services, and the biggest chunk of water of the revenue from the company comes from building, from building those projects. Now, they make also profits in line with revenues. Here you see the profits, but J.P. Morgan's analysts that recently published a report on the company says that the construction building has a price earnings ratio of zero and practically no value. He values the company close to the current stock price just on 50% of net profits. It's really strange for me why is he doing that? That's something that I will have to learn more about or in the future, or he's simply wrong because he's the only negative analyst out of four analysts to discuss this. So the water construction services is something to dig deeper into, but still it makes profit. The company's profitable thanks to the profits that pays the dividend. So very, very interesting despite the negativity of the J.P. Morgan analysts. When we look at the long-term trend, the party has stated that they want to build an ecological civilization and a beautiful China. That's very positive if you are in the sewage, water treatment environment. Recent article from The Guardian and Greenpeace shows that in China, the water you drink is as dangerous as the air you breathe. So 90% of water so polluted that it was essentially functionless. And if we look at the sewage situation, it is okay, pretty developed, especially in the developed parts of China, but then there is a lot of sludge to dispose. Plants are not modernized, a lot of old plants. So a lot of work and I see it as a positive tailwind also globally due to the China One Road, One Belt initiative. So the company might do really, really well over the next decades. When it comes to the financial overview, I always like to read the recent financial reports, see really the details, what's going on and the issues that might be there. And the issues there that I have first seen are that dilution, the transition from asset heavy, which still is asset heavy to asset light. Very interesting. Then the negative cash flows, some people see negative cash flows and run away. And then we have the solution, which is one of solution is selling assets and the dilution that we already mentioned. If I look at the balance sheet, the biggest accounts on the asset side are amounts due from contract customers and receivables under service concession agreements. So contract customers, they're building those projects, as I said, and then until the project is completed and accepted by the customer, it is amount due from contract customers. When it accepted, it becomes a receivable. So they are building a lot and therefore they have a lot of assets and especially as the customer pays them over time. The customer is asset light, they are asset heavy and they are transitioning from that and finding various sources to finance the transition. The asset heavy business leads to a lot of debt and we have 60 billion almost of debt non-current liabilities. That is a big burden on an equity total assets of 139 billion, especially where total liabilities amounts to close to 100 billion. So that's a pretty heavy debt ratio and a big concern with analysts. However, they're transitioning to an asset light model and if they make it and if that concern goes away, this might really be a winner. Further, if we look at cash flows, the operating cash flows are positive, but then due to the huge investments, due to the huge new investments and huge new contracts, then the total cash flows is negative even in operations. They did a small dilution that I'll discuss in a moment, but for now it's negative. Maybe over the next few years, they will turn positives as these businesses that they are building now start providing more and more cash. On the dilution, okay, there is dilution and as they enter into a project with a partner, they sell them equity stakes, they give them parts of their company, but that is always done at the current stock price. So you get the cash, they dilute a little bit, but okay, and if we check the long-term dilution plan, 100% dilution over the last 10 years, but revenues increased what? Almost 15 times. So okay, there is a little bit dilution, but it serves a greater purpose, which is revenue and earnings growth that beats the dilution. So that's one way of looking at it. Now on the investment conclusion, this is very, very interesting. The current price earnings ratio is seven. The dividend yield is 5% and the growth is 15%. Let's say that the company continues to grow at 15% over the next five years. The dividend will be double. The payout ratio is 30%, which is okay, but it will double the dividend. So it will have a 10% dividend in five years. If they continue to grow, expand globally, it is very likely, and if they turn to an asset-like business model, it's very likely that the market might re-rate them, so you have a double whammy there, higher dividend yield due to growth, and then re-rating, let's say that the company like this could earn a price earnings ratio of 15. And if we look a little bit at history, then we can see that the price earnings ratio was often also above 20. So that would be a triple whammy for the company. Average was 15, so if they go back to the average historical price earnings ratio, we have a double, plus if they grow, that's a double, that's a quadruple over the next five years. Price to book ratio was also similar, and now it's close to historical lows. So very, very interesting position, where you have possible re-rating growth if they manage to deal with the risks, of course. If we take a look at the dividend, it has been constantly growing over the past five years. The interim dividend of 2019 is also higher than the previous interim dividend, so the dividend yield will be about 5%, especially even higher if the stock price goes lower. Concerns and peer comparison. Now, there is always the concern about currency. Some expect the Chinese devaluation of 25, 40% towards the dollar as the currency's, let's say, semi-packed to the dollar. So that's something you have to see, but then again, currencies, we don't know which one will be the weakest in the future, so definitely a risk that you have to take into account before investing. Policy changes, if there is a slowdown in the economics of China, if there is a debt liquidity crisis, liquidity issues, then it might hurt the company refinancing before to sell assets at low multiples, and that's always a risk when it comes to these companies. And until it turns to an asset-like business model, the market will always rate it like this. And then analysts, I've read, I think, four analyst reports, three are positive, and JPMorgan is, let's say, neutral on the stock, even if just 50% of the company's value is what JPMorgan gives to the current price. Compared to other companies out there, Veolia, environment also, water utility business, has a high earnings ratio of 29 with 100% dividend yield payout. So if there are concerns, I'm much less concerned to invest in something with a valuation of seven than of 30. My personal strategy, I'm now just looking at Chinese companies. I have already a few. They are similar there. 15%, 20% expected returns over the long term if things develop as expected. I have made some other analysis. I will look through my whole list of China, go into the top 10, see how does that fit my portfolio. But Beijing Water Enterprises, or Beijing Enterprises Water, is definitely a stock that I will put on my watch list, follow it closely, and perhaps even invest when the opportunity is there. I hope you enjoyed this video. If you did, please subscribe and click that notification bell. So that you get notified when there is a video that might be valuable for you. Some stock analysis might not be there in Hong Kong, but we do also analysis of big businesses and you just see it in your feed. Okay, this is valuable for me. You watch that video. If you don't watch, you watch something else. Looking forward to your comments. If you want to see all my analysis, please check my stock market research platform in the link below. Thank you and I'll see you in the next video.