CT Environmental Group – Glaucus Research

CT Environmental Group Ltd (HK: 1363) (“CTEG” or the “Company”) primarily engages in industrial wastewater treatment and hazardous waste disposal. In a crowded and heavily regulated industry where prices are typically set by the Chinese government, CTEG has reported margins far in excess of its competitors. It claims that its success is driven by its business model of building, owning and operating wastewater treatment facilities (the “BOO” model).

In this report, we present publicly available wastewater treatment data from the Chinese government which
directly contradicts CTEG’s reported wastewater treatment volumes at two of its primary facilities. In our
opinion, this is clear and irrefutable evidence that the Company has lied to the investing public about the volume
of water treated at its facilities and as a result, its reported revenues and profitability. This report also presents
SAIC filings and other government records showing that, in our opinion, CTEG has engaged in undisclosed
related party acquisitions of companies secretly connected to its Chairman. Shockingly, we have found evidence
of intimate dealings with the former chairman of China Metal Recycling, which Glaucus exposed as a fraud in
2013 (report available here) and which was subsequently liquidated by Hong Kong regulators.

When we consider the totality of the evidence, we conclude that the Company is materially misrepresenting its
reported financial performance and that its management is so untrustworthy that CTEG is simply uninvestable.
But to be conservative, we value CTEG’s shares at HKD 0.38 per share, an 82% downside from the current share
price. Given that CTEG’s debt levels have ballooned to RMB 2.3 billion in 1H 2016, we believe that it is
reasonable to expect even further downside pressure on the Company’s shares

Company Name
Investment Thesis
Initiation Date
Initiation Market Cap (in USDmm)
Initiation Avg Volume (Shares per day)
Price at Initiation
Price Target
Current Price
% Change
CT Environmental Group – Glaucus Research
HKD 2.14
HKD 0.38
HKD 1.29