Moya Holdings Asia - RHB Invest 2018-05-02: A Superb 1Q18

Moya Holdings Asia - RHB Invest 2018-05-02: A Superb 1q18 MOYA HOLDINGS ASIA LIMITED SGX: 5WE

Moya Holdings Asia - A Superb 1Q18

  • Moya reported a sterling 1Q18, with PATMI surging 560% y-o-y to SGD8.8m, making up 31.9% of our FY18 estimate.
  • 1Q18 revenue also spiked up by 268% y-o-y to SGD45.06m, mainly due to the acquisition of Acuatico in 2017.
  • Going forward, we do expect 2018 to be a stellar year for the company, with acquisitions and the extension of the concession in the pipeline, as well as the full accretion of Acuatico’s numbers for the full year to drive earnings growth.
  • As such, we maintain our BUY call, with an unchanged DCF-backed Target Price of SGD0.15 for a 50% upside.

Strong organic growth from the reduction of non-revenue water (NRW) and increased connections.

  • Only 22% of Indonesia’s population has access to clean piped water, and many still rely on higher-cost water sources like jerry cans, which costs IDR1,000-1,500 for 20 litres of this basic living necessity. In contrast, piped water costs just IDR7 per litre. 
  • In addition, management is keen to drastically reduce its NRW by more than 50% by 2020, which should boost revenues and margins – as less cost is needed, compared to a new greenfield project. 
  • In addition, water tariffs for some regions it covers are also likely to be hiked up by 8-12% annually, which would be positive for Moya’s margins.

Restructuring and extension of renewal for Aquatico.

  • Indonesia’s largest water operators are in the midst of discussions with the Government on the restructuring of expiring agreements, ie on the Government taking over the billing collection from 2017 onwards. However, we think that any agreement struck on restructuring would likely include an extension for the existing expiring concessions. 
  • As Acuatico’s concession has about 5-7 years remaining for its portfolio, its concession being extended by 20-25 years would be extremely positive for Moya. This would be in terms of depreciation per year being much lower – which would boost its P&L, and increase the value of its asset.

Consolidating the Indonesian water sector.

  • With more than SGD70m of cash still on its balance sheet, we think that there would likely be more acquisitions in the pipeline in the near term. 
  • Moya is likely to continue acquiring and consolidating private water treatment players in Indonesia – which would further boost its exponential growth, going forward.

More acquisitions ahead; maintain BUY.

  • With the planned expansion in capacity for two of its water plants, Bekasi and Tangerang, coupled with NRW reduction in the next five years, Moya is set to enjoy strong organic growth. It is now Indonesia’s largest water treatment company in terms of capacity, and management aims to reach 20,000 litres per second in capacity this year, from 13,000 litres per second presently. This would also give it an advantage, especially when negotiating terms in buying out existing smaller players.
  • With further cost savings, volume expansion, and the recovery of its NRW providing strong organic growth – coupled with additional acquisitions in the pipeline to further boost NPAT – we think the outlook is bright for Moya. 
  • Key risks to our call include a change in government regulations

Jarick Seet RHB Invest | Lee Cai Ling RHB Invest | 2018-05-02
SGX Stock Analyst Report BUY Maintain BUY 0.150 Same 0.150