Moya Holdings Asia - RHB Invest 2018-03-02: An Amazing FY18 Ahead

Moya Holdings Asia - RHB Invest 2018-03-02: An Amazing FY18 Ahead MOYA HOLDINGS ASIA LIMITED 5WE.SI

Moya Holdings Asia - An Amazing FY18 Ahead

  • Moya Holdings Asia reported a strong FY17 following the accretion of Aquatico’s numbers, with topline and NPAT surging 381% to SGD132m and 137% YoY to SGD7.7m respectively
  • We do expect 2018 to be a superb year for Moya, with acquisitions and extension of the concession in the pipeline, as well as the full accretion of Aquatico for the full year. 
  • However, we lower FY18F PATMI by 10% to account for higher amortisation and higher financing costs. As a result, our DCF-backed Target Price is reduced to SGD0.15 (from SGD0.17, 67% upside), implying 15x FY18F P/E.

Accretion of Aquatico in FY17. 

  • In FY17, Moya reflected the full accretion of its latest acquisition Aquatico into its numbers, with superb topline and NPAT growth of 381% to SGD132m and 137% y-o-y to SGD7.7m respectively, despite one-off acquisition costs. 
  • On a steady state, management expects administrative expense to be around SGD8m a quarter, and for finance costs to be around SGD7m a quarter.

A cash cow generating SGD20.9m in 4Q17. 

  • Moya generated SGD20.9m from its operations in 4Q17. We expect it to generate around SGD80m cash from its operations a year in FY18. This would allow the company to either lower its gearing or enable it to fund its operations to reduce its non-revenue water (NRW) as well as further acquisitions ahead.

Consolidating the Indonesian water sector. 

  • In the near term, with more than SGD100m of cash still on Moya’s balance sheet, we think more potential acquisitions may be likely. 
  • We believe Moya is likely to continue to acquire and consolidate the Indonesian private water treatment players, which would further boost its earnings growth, going forward. The company may also use part of the cash hoard to decrease its debt and ultimately lower its financing costs of SGD7m a quarter.

More acquisitions to come – Maintain BUY. 

  • With planned expansion of capacity in two of its existing water plants, Bekasi and Tangerang, coupled with additional capex to reduce NRW (non-revenue water) in the next five years, this would help to ensure strong organic growth for Moya. 
  • Moya Asia is the largest treatment player in terms of capacity, and management aims to reach 20,000 litres/second from its existing 13,000 litres/second capacity by 2018. This will also give it an advantage, especially when negotiating terms over a buyout of existing smaller players.
  • In addition, the IRRs for a water project in Indonesia are attractive, typically around 15%, double than that of a similar project in China. With further cost savings, volume expansion and the recovery of its NRW providing strong organic growth – and possibly, additional acquisitions in the pipeline to further boost NPAT, we think the outlook is bright for Moya. 
  • However, we lower our FY18F NPAT by 10%, on higher amortisation and financing costs. As a result, our DCF-backed Target Price is revised to SGD0.15. Maintain BUY.
  • The key risk would be any change in government regulations

Jarick Seet RHB Invest | 2018-03-02
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.15 Down 0.170