Moya Holdings Asia - RHB Invest 2020-01-09: Acquisition Of Obor Group; Maintain BUY


Moya Holdings Asia - Acquisition Of Obor Group; Maintain BUY

  • Maintain BUY with higher DCF-backed target price, 13% upside. See Moya Holdings Asia Target Price.
  • MOYA HOLDINGS ASIA (SGX:5WE) announced the acquisition of Obor Infrastructure Pte Ltd (Obor), together with its subsidiaries (Obor Group) for SGD24.73m – to be funded by internal resources. See Moya Holdings Asia Announcements.
  • Obor owns a 73.25% stake in PT Tanah Alam Makmur (TAM), which generated NPAT of SGD1.64m in 2018 and SGD2.49m for 9M19. As a result, we lift our FY20F-21F PATMI by 6-7% to include this acquisition and consequently, raise our target price.

Synergistic acquisition.

  • Obor Group is in the business of developing and operating water treatment facilities as well as supplying bulk water to municipal water companies in Banten Province, Indonesia – similar to that of Moya.
  • This acquisition would allow Moya to expand its production capacity and customer reach. It also should enable Moya to integrate its operations and supply chains as well as achieve greater economies of scale, which are expected to improve the efficiency and profitability of the combined entity.

Accretive to EPS.

  • Moya had indicated that it would to use a portion of the rights issue proceeds for M&A, and based on its track record, we expect future acquisitions to be yield accretive. This should further boost PATMI in FY20F, which was in the case with Obor Group that generated 9M19 PATMI of SGD2.49m. And as the acquisition is to be funded entirely by internal resources, it would be accretive for Moya.

Maintain BUY.

  • 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 Pte Ltd also purchased 200m shares at SGD0.10/unit in Jun 2018. See Moya Holdings Asia Share Price. We expect more accretive acquisitions to come as that is part of management’s long-term strategy to grow the company at a quicker pace.
  • With strong EPS growth of 22.4% in FY20F, coupled with undemanding valuations, we maintain BUY with a higher target price to account for the accretive impact from its latest acquisition. See Moya Holdings Asia Target Price.
  • Key downside risk includes changes in government regulations affecting its outlook.
  • RHB is the only broker covering Moya Holding Asia. See Moya Holdings Asia Analyst Reports.

Jarick Seet RHB Securities Research | 2020-01-09
SGX Stock Analyst Report BUY MAINTAIN BUY 0.083 SAME 0.083