Moya Holdings Asia - RHB Invest 2017-12-19: More Acquisitions Upcoming

MOYA HOLDINGS ASIA LIMITED 5WE.SI

Moya Holdings Asia - More Acquisitions Upcoming

Through the acquisition of Aquatico, Moya has become the largest and only listed treatment water player in Indonesia. With a SGD100m cash hoard, we believe that it would likely continue to acquire and consolidate the Indonesia private water treatment players in 2018.
With further cost savings initiatives, increased capacity, recovering NRW to further boost margins as well as a potential renewal extension for Aquatico, we think its outlook is bright.

In 3Q17, Moya reflected the full accretion of its latest acquisition, Aquatico, into its numbers which saw superb topline & NPAT growth of 845% to SGD45.8m and 134% YoY to SGD5.54m respectively despite a one-off acquisition cost of SGD0.54m.

With more than SGD100m of cash still on the balance sheet, we think that there would likely be more potential acquisitions in the pipeline in the near-term. This is as the company is likely continue to acquire and consolidate the Indonesia private water treatment players, which would further boost its explosive growth going forward.
It might also use part of its cash hoard to decrease debt and ultimately lower financing costs of SGD6.9m a quarter.

With only 59% of Aquatico’s water reaching the masses, the remaining 41% of leakages can actually boost the NPAT substantially if more of this NRW (non-revenue water) can be recovered and sold, which can be done through refurbishing or replacing rusty leaking pipes as well as other methods.
Management is likely to initiate on a plan to reduce its NRW by 50% gradually by 2023, which would be very beneficial for Moya. A reduction in NRW would further boost its topline and margins extensively. This is as a majority of the gross profit from the incremental sales of NRW is likely to flow down to PBT directly, as well as for a renewal of its concessions.

A planned expansion of capacity in two of its existing water plants, Bekasi and Tangerang, coupled with additional capex to reduce its NRW in the next five years would help to ensure strong organic growth for Moya.
It has become the largest treatment player in terms of capacity and management aims to reach 20,000 litres/s from its existing 13,000litres/s capacity by 2018. This would also give it an advantage, especially when negotiating terms over a buyout of existing smaller players.
In addition, the internal rate of return (IRR) for a water project in Indonesia is attractive, typically around 15%, double than that of a similar project in China.
With further cost savings, volume expansion, the recovery of NRW providing strong organic growth and additional acquisitions in the pipeline to further boost NPAT, we think the outlook is bright for Moya.
Maintain BUY with an unchanged DCF-based TP of SGD0.17.

Moya Holdings Asia is one of the 2018 Top Stock Picks by RHB Invest.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-12-19

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