Moya Holdings Asia - RHB Invest 2019-03-05: Sunny Skies After Record Year; Keep BUY


Moya Holdings Asia - Sunny Skies After Record Year; Keep BUY

  • Reiterate BUY, Target Price of SGD0.11 offers 43% upside.
  • Moya enjoyed a record FY18, with PATMI surging 229% y-o-y to SGD25.2m and EBITDA up 88% y-o-y to 69.4m. Looking ahead, its outlook could be boosted by several catalysts like potential acquisitions of yield-accretive water assets and a concession extension.
  • Moya is trading well below the level of its recent rights issue price of SGD0.095 per unit, or Gateway’s cost of entry in acquiring a stake in the company, at c.SGD0.103 per unit. As such, its current share price level presents a good opportunity to accumulate the stock.

Extension of concession likely after elections.

  • MOYA HOLDINGS ASIA LIMITED (SGX:5WE) has been negotiating the extension of its Acuatico concession with the Indonesian Government since 3Q17. Management revealed it will likely commit to a certain amount of capex to invest in a new 3,000 litres/s plant, as well as decrease non-revenue water (NRW) by 20% in 5-10 years. In addition, it will stop handling customer service or collecting water tariffs from end-consumers, and deal solely with the Government.
  • The increase in volume will offset a reduction of water tariffs, which should keep EBITDA unchanged. We expect its concession to be extended after Indonesia’s general election (scheduled for 17 Apr).

Inorganic and organic growth.

  • Moya intends to use a portion of the rights issue proceeds for M&A. We understand it is currently in negotiations with a few parties on this matter, and management is optimistic that one acquisition will be completed by 2Q19. Based on its track record, we expect the acquisition to be yield-accretive and should further boost PATMI in FY19.
  • In addition, organic growth could also come from tenders that were secured over the past few months.

Time to accumulate.

  • Moya is trading well below price levels of its recent rights issue (SGD0.095/unit), as well as below Gateway’s cost of entry of c.SGD0.103/unit where majority shareholder Tamaris Infrastructure also purchased 200m shares at SGD0.10/unit in Jun 2018. Also, paring down NRW will likely help to spur growth even more. Premised on this, we believe its current share price levels present investors with a good opportunity to accumulate the stock.
  • We reiterate our BUY call, with an unchanged DCF- based Target Price of SGD0.11.
  • Key downside risks include changes in government regulations affecting its outlook.
  • RHB is the only broker covering Moya.

Jarick Seet RHB Securities Research | Lee Cai Ling RHB Invest | 2019-03-05
SGX Stock Analyst Report BUY MAINTAIN BUY 0.110 SAME 0.110