Moya Holdings Asia - RHB Invest 2018-11-29: New Build-Operate-Transfer Project Ramping Up Capacity; Stay At BUY


Moya Holdings Asia - New Build-Operate-Transfer Project Ramping Up Capacity; Stay At BUY

  • Moya has signed a cooperation agreement with Perusahaan Daerah Air Minum Tirta Moedal, the municipal water company of Semarang City, Central Java for a Build-Operate-Transfer (BOT) project.
  • The 25-year concession calls for a new water treatment plant with output of up to 1,000 litres/s at a cost of IDR 417m. Construction should start by 23 May 2019 and is expected to be completed within 2 years. This is in line with management’s aim to expand to 20,000 litres/s.
  • We remain positive on Moya and reiterate our BUY.
  • RHB is the only broker covering Moya.

New Build-Operate-Transfer (BOT) project of 1000 litres/s.

  • The IDR 417m construction cost will be funded by external borrowings and internal cashflows. The project will involve a transmission pipeline of up to 9.1km as well as one main reservoir with a capacity of 6,600m3 and two distribution reservoirs with capacities of 2,700m3 and 5,200m3.
  • Construction will commence by 23 May 2019 and is expected to be completed within 2 years.

Extension of concession should be coming.

  • Moya is in the midst of extending its Aquatico concession with the Government and an agreement could be announced soon. Management revealed they would likely commit to a certain capex for a new 3000 litres/s plant, as well as capex to reduce their non-revenue water (NRW) by 20% in 5-10 years.
  • In addition, they will likely stop handling the customer service or collection of water tariffs from the end consumer, while only dealing with the Government.
  • The increase in volume would offset the reduction of water tariffs which should eventually leave EBITDA unchanged.

Acquisition likely in 4Q18.

  • Moya intends to use a partial portion of the rights proceeds for M&A. We understand the company is in the midst of negotiating with a few parties and management is optimistic for one acquisition to be completed by the end of 2018.
  • Based on their track record, we expect the acquisition to be accretive and will likely provide another boost for its PATMI in FY19F.

Strong organic pipeline ahead - Maintain BUY.

  • This is from lower financing costs, concession extensions and recovery of NRW to provide strong organic growth and additional accretive acquisitions in the pipeline to further boost NPAT. In addition, its organic growth will also come from tenders they have won in the past few months. As a result, we maintain BUY with an unchanged DCF- backed Target Price of SGD0.11 implying 64% upside.
  • Key risks include changes in government regulations.
  • RHB is the only broker covering Moya.

Jarick Seet RHB Securities Research | Lee Cai Ling RHB Invest | 2018-11-29
SGX Stock Analyst Report BUY MAINTAIN BUY 0.110 SAME 0.110