Moya Holdings Asia - RHB Invest 2018-09-26: Expedition Series ~ Visiting Moya’s Water Treatment Plant


Moya Holdings Asia - Expedition Series: Visiting Moya’s Water Treatment Plant

  • Maintain BUY, DCF-based Target Price of SGD0.13, 63% upside.
  • We visited Moya’s water treatment plants in Jakarta (see photos in the PDF report attached), Indonesia on 13 Sep and came away positive on its outlook.
  • Three main catalysts, most likely to come by end- FY18, should be positive for the company:
    1. More acquisitions to come from the SGD40m raised from the rights issue, allocated for M&A;
    2. Potential extension of concessions;
    3. Strong organic growth to drive earnings in FY19F-20F.

Potential acquisitions incoming.

  • With the SGD40m raised from the rights issue targeted for M&A and expansion plans, and with management’s aim to reach 20,000 litres per second vs 13,000 currently, we expect Moya to engage in an acquisition by year-end. This should be immediately earnings-accretive.

~ ~ Where SG investors share

Restructuring and extension of renewal for Aquatico.

  • We think any agreement of the restructuring will likely include an extension for the existing expiring concession. 
  • Aquatico’s concession has about 5-7 depreciation per year, while there will be an immediate increase to the value of the asset. We expect this extension to also come by the end of 2018.

Organic growth to remain strong.

  • 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 can cost IDR1,000-1,500 for 20 litres for this basic living necessity. In contrast, piped water costs just IDR7 per litre. 
  • In addition, management is keen to drastically reduce non-revenue water (NRW) by more than 50% by 2020. This will boost revenues and margins as less cost is needed, vs a new greenfield project.

New build-operate-transfer (BOT) tender.

  • Moya has won a tender for a BOT (build-operate-transfer) water supply system in West Semerang with its partner, PT Medco Gas Indonesia. The new water treatment plant facility will likely have production capacity of up to 1,000 litres per second, together with a transmission pipeline of up to 9.1km. The construction phase will commence by Apr 2019 and will complete within two years.
  • Moya will own a 75% stake in this JV.

Improved efficiency and fine-tuning operations; maintain BUY.

  • We visited Moya’s leakages or drop in pressure. 
  • We think the outlook is bright for Moya, and believe investors can accumulate the share for the long term. Maintain BUY, with an unchanged DCF-backed Target Price of SGD0.13.
  • Key downside risks to our call are political and currency risks.

Jarick Seet RHB Securities Research | 2018-09-26
SGX Stock Analyst Report BUY Maintain BUY 0.130 Same 0.130