Broker: Maybank Research Pte Ltd
Date of Report: August 18, 2025
Sanli Environmental: Poised for Multi-Year Growth with Robust Margins and Order Book Surge

Introduction: Sanli Environmental in the Spotlight

Sanli Environmental (SANLI SP), a Singapore-based, locally-owned water treatment and maintenance provider, is positioned at a pivotal moment as it emerges from the margin pressures of the Covid era. With a surge in local water infrastructure projects supporting Singapore’s national strategy to reduce reliance on imported water, Sanli is forecasted to embark on a multi-year growth trajectory. Maybank Research initiates coverage with a BUY rating and a target price (TP) of SGD0.38, representing an 81% upside from its current share price of SGD0.21.

Investment Thesis: Margin Rebound and Explosive Earnings Growth

Sanli’s profitability suffered during FY24 and FY25 due to higher raw material and labour costs post-Covid, particularly impacting its Engineering, Procurement, and Construction (EPC) margins. However, the completion of most low-margin Covid-era projects has paved the way for a sharp margin rebound starting FY26. Robust order-book trends and a pipeline of larger, higher-margin contracts underpin forecasts for dramatic earnings growth:

• FY26 EPS projected to surge by 258% YoY
• FY27 EPS forecasted to grow by 40% YoY
• Revenue expected to climb 10-15% YoY over the next 2 years

Sanli’s order-book stood at SGD333 million as of July 2025 and is anticipated to nearly double to SGD500-600 million by December 2025, with potential to reach SGD1 billion by end-2026. This backlog covers almost two years of revenue, providing significant visibility and stability.

Order Book Expansion: Riding Singapore’s Water Capex Wave

Singapore invests nearly SGD1 billion annually in water infrastructure to boost self-sufficiency and enhance climate resilience. Sanli holds a first-mover advantage in polder projects, aligning with the government’s SGD100 billion shoreline protection initiative. Major project tenders, including Changi NEWater Facility 3 where Sanli is a top contender, are expected to be announced soon. These wins could catapult Sanli’s order book to unprecedented levels.

Segment Breakdown: EPC, Operations & Maintenance, Chemicals, and New Growth Drivers

EPC (Engineering, Procurement, and Construction)

Sanli’s EPC segment remains the largest revenue contributor with SGD111.2 million in FY25, up 6.0% from FY24. While gross profit declined due to legacy contracts, margins are expected to rebound to 13% in FY26 and beyond.

Operations & Maintenance (O&M)

The O&M segment provides recurring, stable revenue from maintenance contracts for water facilities. O&M revenue almost doubled to SGD44.2 million in FY25, with gross margins forecast to recover to 20% in FY26E.

Chemicals Manufacturing & Data Centre Cooling: New High-Margin Growth Vectors

Sanli’s breakthrough into magnesium hydroxide slurry production for marine and industrial uses offers gross margins of 30-50%, far above its traditional segments. With a capacity to scale to 4,000 tonnes/month, revenue and profit from this segment are poised for exponential growth. Additionally, Sanli is pre-qualified to provide water cooling and maintenance systems for data centres in Johor, Malaysia, tapping into the fast-growing data centre market.

Financial Performance and Projections

Sanli Environmental has demonstrated resilient growth, with revenue expected to rise from SGD65 million in FY22 to SGD232 million in FY28E. Margins, which sank during Covid, are forecast to recover to pre-pandemic levels and beyond, driving strong profitability and cash flow.

Dividend Policy: Shareholder Rewards Set to Increase

Sanli’s 30% payout ratio supports a rising dividend yield, forecast to climb to 5.6% by FY28E, rewarding shareholders as profitability recovers.

Peer Comparison: Sanli’s Valuation and Competitive Position

Sanli is valued at a blended FY26/27E P/E of 15x, reflecting a 25% discount to peers considering its market cap and size, yet offering strong ROE and dividend yield.

ESG and Sustainability: Strong Alignment with Environmental Goals

Sanli’s core business in water and waste management is inherently ESG-aligned, with diversification into green sectors such as chemicals manufacturing and solar energy. Key highlights include:

• Zero safety incidents from FY2023–FY2025
• ISO 14001 certifications and full compliance
• Community engagement initiatives, including waterway cleanups
• Commitment to diversity, inclusion, and employee development

Areas for enhancement remain, such as setting absolute GHG reduction targets, accelerating Scope 3 emissions disclosure, and increasing board gender diversity.

Risks: What Investors Should Watch

• Client concentration: Over 90% of revenue from PUB creates vulnerability to changes in public sector procurement.
• Execution risks: Labour shortages, supply chain disruptions, and overseas regulatory complexity could impact projects and margins.
• Financial exposure: High gearing (135.3% in FY25), interest rate volatility, and credit risk from concentrated receivables.
• Technological disruption: Rapid innovation in environmental technologies requires agility and ongoing investment.

Management Team: Experienced Leadership Driving Growth

Sanli’s management brings deep sector experience and a track record of operational excellence. CEO Sim Hock Heng oversees strategic initiatives, while Deputy Chairman Kew Boon Kee focuses on succession planning and M&A. CFO Fredrik Tan leads finance and investor relations, and Executive Director Lee Tien Chiat drives the chemicals manufacturing segment.

Conclusion: Sanli Set to Turn on the Taps for Shareholder Value

With margins set to rebound, a rapidly expanding order book, high-margin new business drivers, and strong national and regional tailwinds, Sanli Environmental is poised for multi-year growth. The stock offers attractive upside potential, robust dividend yields, and is a prime M&A target for larger players seeking proven expertise in government water projects. Investors seeking exposure to Singapore’s environmental capex cycle and resilient utility growth should keep Sanli Environmental firmly on their radar.