Maybank Research Pte Ltd
Date of Report: August 18, 2025

Sanli Environmental: Riding the Tidal Wave of Singapore’s Water Infrastructure Boom

Introduction: Sanli Environmental in Prime Position for Multi-Year Growth

Sanli Environmental (SGX: SANLI SP), Singapore’s only pure locally-owned water treatment and maintenance provider, is on the brink of explosive growth. With the expiry of low-margin COVID-era projects and an anticipated rebound in margins, Sanli is poised to nearly double its order book and enter a new phase of profitability. Maybank Research initiates coverage with a BUY rating and a target price of SGD0.38, representing an 81% upside from the current price of SGD0.21.

Investment Thesis: At the Inflection Point

Sanli’s financial performance in FY24 and FY25 was hampered by pandemic disruptions and surging post-COVID costs, especially in its core Engineering, Procurement, and Construction (EPC) segment. However, these headwinds are abating as legacy low-margin projects conclude. With a substantial SGD333 million order book (as of July 10, 2025) and a robust pipeline of government water infrastructure projects, Sanli is set for a multi-year uptrend. Over 90% of revenue is derived from Singapore’s PUB (Public Utilities Board), positioning Sanli as a vital player in the island nation’s push for water self-sufficiency.

Key Highlights at a Glance

• Order Book Growth: Projected to surge from SGD333 million to SGD500-600 million by end-2025, with the potential to hit SGD1 billion by end-2026.
• Margin Recovery: EPC margins expected to rebound from 5.5% (FY25) to 13% (FY26E), O&M margins returning to 20%+.
• Profit Explosion: FY26 and FY27 EPS forecast to grow by 258% and 40% respectively.
• New High-Margin Businesses: Magnesium hydroxide manufacturing and data centre cooling solutions offer significant new revenue streams.
• Dividend Growth: Rising profitability and a 30% payout policy set to drive yields from 3.1% (FY26E) to 5.6% (FY28E).
• Prime M&A Target: A leading acquisition candidate for larger water infrastructure players seeking Singapore or regional entry.

Financial Snapshot and Performance Metrics

Order Book Expansion: Sanli on the Cusp of Record Projects

Singapore’s government is investing nearly SGD1 billion annually in water infrastructure to reduce reliance on Malaysian imports. Sanli, with its proven track record in polder and coastal protection projects, is well-placed to benefit from this surge in public spending. The company is bidding for several large projects, including the Changi NEWater Facility 3, where Sanli is the third-lowest bidder and seen as a front-runner due to its execution history. Winning this SGD205 million tender would catapult its order book to over SGD500 million—a new record.

Revenue Mix and Business Segments

Sanli’s business is split across three main segments:

• Engineering, Procurement, and Construction (EPC): Core revenue driver, contributing SGD111.2 million in FY25 (up 6% YoY). EPC margins hit by legacy contracts are set to rebound as new, higher-margin projects commence.
• Operations & Maintenance (O&M): Recurring revenue base, nearly doubling to SGD44.2 million in FY25. O&M margins are projected to return to 20%+ as contract mix improves.
• Chemicals Manufacturing (CHM): New business launched in FY23, focused on magnesium hydroxide slurry—a high-margin product used in marine and waste treatment applications. Initial vessel top-ups have been completed, with capacity and client base set to expand rapidly.

*Estimated for magnesium hydroxide slurry business

Emerging Growth Engines: Magnesium Hydroxide & Data Centre Cooling

Sanli’s chemicals segment is scaling up rapidly, with its magnesium hydroxide slurry plant capable of producing 1,000 tonnes/month. With rising demand from the marine sector and potential to quadruple capacity, this business could become a major profit driver, boasting gross margins of 30–50%. Additionally, Sanli is pre-qualified to deliver water cooling and maintenance systems for data centres in Johorland, Malaysia—another high-margin, high-growth sector.

Singapore’s National Water Strategy: A Pipeline of Opportunity

Singapore’s vision to reduce imported water dependency translates into a robust, recurring flow of projects—ranging from NEWater and desalination plants to coastal and flood protection. PUB’s capital expenditure, supported by a SGD100 billion climate resilience plan, ensures a consistent stream of project tenders. Sanli’s dominance in maintenance contracts (over 30 concurrent PUB contracts) further solidifies its revenue resilience.

Dividend Payout and Shareholder Returns

With profits rebounding, Sanli’s 30% dividend payout policy will result in rising dividends over the next years. The yield is expected to increase from 3.1% in FY26E to 5.6% in FY28E, rewarding shareholders as earnings expand.

Valuation and Peer Comparison

Sanli’s target price of SGD0.38 is based on a 15x blended FY26/27E P/E, reflecting a 25% discount to regional peers given its smaller market cap and revenue base. Despite this, Sanli offers a superior earnings growth trajectory and is trading at an attractive valuation.

ESG and Corporate Governance: Strong Foundations, Room for Growth

Sanli’s business is inherently ESG-aligned, with zero safety incidents, ISO 14001 certification, and a focus on green sectors such as chemicals manufacturing and solar. The company has opportunities to further strengthen its ESG credentials by setting absolute GHG targets, improving board gender diversity, and enhancing ESG-linked executive compensation.

Risk Factors to Monitor

• Client Concentration: Heavily reliant on PUB; changes in government spending or tender delays could impact revenue.
• Execution Risk: Project delays, labour shortages, or supply chain issues could affect delivery and margins.
• Financial Exposure: High debt levels (net gearing 135.3% in FY25A, forecast to drop to 4.9% by FY28E) and cash flow volatility require careful management as Sanli scales up.
• Overseas Expansion: Entry into Malaysia and Thailand presents regulatory and execution risks.
• Technological Change: Advances in water and waste tech could shift competitive dynamics.

Leadership Team

• Mr. Sim Hock Heng – CEO and Executive Director, 25+ years in water and waste management, co-founder and strategic driver of Sanli’s growth.
• Mr. Kew Boon Kee – Deputy Chairman and Executive Director, co-founder, expert in project delivery and M&A.
• Mr. Tan Thean Seang, Fredrik – CFO, leads finance, investor relations, M&A; chartered accountant.
• Mr. Lee Tien Chiat – Executive Director, leads chemicals manufacturing and EPC execution.

Conclusion: A Pure-Play Water Infrastructure Growth Story

Sanli Environmental is strategically positioned to capture the next wave of Singapore’s water infrastructure buildout. As margins recover and new high-value business lines ramp up, Sanli offers rare exposure to a multi-year growth story, backed by recurring government projects, rising dividends, and potential M&A interest. For investors seeking a high-growth, ESG-aligned infrastructure play in Southeast Asia, Sanli is one to watch.

Company Snapshot

• Share Price (as of report): SGD 0.21
• 12-month Price Target: SGD 0.38 (+81%)
• Market Cap: SGD 63.4 million
• Issued Shares: 302 million
• Major Shareholders: Typha Holdings (37%), Tan Kim Seng (5%), Lee Chiat Tien (4.5%)
• 52-week High/Low: SGD 0.22 / 0.07
• Free Float: 60%