Moya - RHB Invest 2019-05-02: 1Q19 Hit By Absence Of FX Gains; Still A BUY

MOYA HOLDINGS ASIA LIMITED (SGX:5WE)

Moya - 1Q19 Hit By Absence Of FX Gains; Still A BUY

BUY, new Target Price of SGD0.095 from SGD0.11, 17% upside.
MOYA HOLDINGS ASIA LIMITED (SGX:5WE) reported lower 1Q19 earnings, mainly on the absence of a SGD10.1m one-off gain and a SGD0.7m FX loss.
We imputed further FX losses and higher interest costs into our forecasts, which dropped our FY19F PATMI by 14% and decreased our Target Price. Moya is trading at 6.3x FY19F EV/EBITDA, which is attractive.

The earnings decline in 1Q19 was mainly due to the absence of a SGD10.1m one-off gain from FX as well as a SGD3.2m one-off write-back of provision for impaired trade receivables.
Moya was also hit by a SGD0.7m FX loss. Business remains stable with 3% y-o-y growth and a 19% boost in gross profit. EBITDA rose by 16% y-o-y to SGD18.9m

Moya 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, which was held on 17 Apr.

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 2H19. Based on its track record, we expect the acquisition to be yield-accretive and should further boost PATMI in FY19.
In addition, organic growth should also come from tenders that were secured over the past few months.

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.
On an EBITDA level, it is trading at just an effective 6.3x FY19F EV/EBITDA which is attractive. As a result, we maintain BUY.
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 | https://www.rhbinvest.com.sg/ 2019-05-02

SGX Stock Analyst Report BUY MAINTAIN BUY 0.095 DOWN 0.110