Moya Holdings Asia - RHB Invest 2018-03-16: Expansion Of Tangerang Water Supply Capacity

Moya Holdings Asia - RHB Invest 2018-03-16: Expansion Of Tangerang Water Supply Capacity MOYA HOLDINGS ASIA LIMITED 5WE.SI

Moya Holdings Asia - Expansion Of Tangerang Water Supply Capacity

  • Moya Holdings Asia announced that it has secured into an expansion amendment to the BOT cooperation agreement with PDAM Tangerang, to expand the water supply capacity to 2,000lps from the existing 950lps.
  • The total pipe network to be installed would also increase to 1,200km, from 631km. Construction, costing SGD110m, is estimated to be completed by 2024, and water sales contributions are expected to rise gradually by 200lps pa. 
  • We think the outlook is bright for Moya, and maintain our BUY call with an unchanged Target Price of SGD0.15 (53% upside).



Capacity boosted to 2,000lps. 

  • Moya Holdings Asia (Moya) has secured an expansion amendment to the build-operate-transfer (BOT) cooperation agreement with the local water authority (PDAM) in Tangerang, Indonesia, to expand the water supply capacity to 2,000 litres/second (lps) from the existing 950lps. 
  • The total pipe network to be installed would also be increased to 1,200km from 631km. The cost of construction, estimated to be around SGD110m, is expected to be completed by 2024. In addition, water sales contributions are expected to increase gradually by 200lps pa, which would contribute positively to Moya’s topline and bottomline.


Extension of concession to be a new catalyst. 

  • We understand that management is currently in talks with PDAM to extend the concession for its Aquatico assets (which has seven years remaining) to a potential 27 years. We believe an extension would greatly benefit Moya. 
  • We are expecting a positive outcome in the near future, and believe it would lead to a re-rating of the stock.


Consolidating the Indonesian water sector. 

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


More acquisitions to come – maintain BUY. 

  • The planned expansion of capacity at two of its existing water plants (Bekasi and Tangerang) coupled with additional capex to reduce non-revenue water (NRW) over the next five years should ensure strong organic growth for Moya. 
  • Moya Holdings Asia is the largest water treatment player in terms of capacity, and management aims to reach 20,000lps from its existing 13,000lps capacity by 2018.This would also give it a further advantage, especially when negotiating terms over a buyout of existing smaller players. 
  • 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. 
  • We maintain our BUY call with unchanged Target Price of SGD0.15. 
  • Key risk would be unfavourable changes in government regulations.




Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2018-03-16
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.150 Same 0.150



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