Water infrastructure contractor Ming Hing Waterworks is looking to make more acquisitions on the mainland in a bid to ensure half of the company's revenue comes from there within the next five years.

In an interview with China Daily, the Ming Hing Deputy Chairman and CEO Johnson Yuen attributed the foray to the Closer Economic Partnership Arrangment (CEPA).

Yuen, a Hongkonger, said CEPA makes it easier for Hong Kong companies to become established on the mainland.

The company's first mainland deal was made in September, when it acquired water-service-provider Ningxiang Water in Central China's Hunan province.

The company's senior development manager, So Sai-kwan, also said that several deals are in the pipeline.

"We will enter into agreements for two joint-venture water-service projects in Leizhou of Guangdong province and Nanning in the Guangxi Zhuang Autonomous Region at the end of this month. Ming Hing will invest HK$100 million in the two projects," So said, adding that four other projects are being hammered out in Guangdong and Hunan provinces, and deals may be reached this year.

Mainland companies with a daily water- supply capacity of 100,000 to 150,000 tons are their potential targets.

The company raised HK$240 million through share placements last year, but Yuen said there is no urgent need to issue more shares now. "We have sufficient cash to bankroll the expansion," he said.

With the acquisitions, Yuen believes that the company's daily water supply capacity of its mainland arm could grow from 95,000 tons in 2007 to 400,000 tons this year.

Apart from acquiring rivals, Ming Hing would also like to expand its mainland market shares by partnering with China Water Affairs Group, which became a 16 percent shareholder of Ming Hing last April.

Yuen said the partnership substantially helped beef up the company's exposure to the mainland's water-engineering-services sectors.

"We take on many water-system-management projects in inner cities with the help of China Water Affairs Group," Yuen said.

Meanwhile, with the increasing awareness of water pollution, Yuen said the mainland arm would expand to include sewage processing. "The sewage outfits will integrate with our water-services factories because it is more cost-effective," Yuen said.

Yuen predicted that water services will constitute 80 percent of the company's mainland business, and the sewage and water infrastructure segments will make up the remaining 20 percent.

"Overall, we project that the revenue contribution from our mainland business will account for 50 percent of our total revenue in five years."

Gross profits of Ming Hing grew from HK$12.5 million to HK$35.8 million for the six-month period ending on Sept 31, while its turnover recorded a 65.9 percent increase to HK$310 million.

(HK Edition 03/07/2008 page3)