SINGAPORE (May 2): RHB is maintaining its “buy” call on Moya Holdings Asia with an unchanged target price of 15 cents after the group reported a “sterling” and “superb” 1Q18 set of results, in the research house’s view.
In a Wednesday report, lead analyst Jarick Seet says he expects 2018 to be a stellar year for Moya with acquisitions and the extension of expiring concessions in the pipeline, particularly with the full accretion of Aquatico’s numbers to drive the group’s earnings growth ahead.
Noting Moya’s intentions to reduce its non-revenue water (NRW) by more than 50% in 2020, Seet thinks this could further boost the group’s revenues and margins as less cost would be needed compared to a new green field project.
Further, with Indonesia’s largest water operators in the midst of discussions with the country’s government on the restructuring of expiring agreements, the analyst thinks any agreement struck on restructuring is likely to include an extension for Aquatico’s expiring concessions.
“As Acquatico’s concession has about 5-7 years remaining for its portfolio, its concession being extended by 20-25 years would be extremely positive for Moya. This would be in terms of depreciation per year being much lower – which would boost its P&L, and increase the value of its asset,” opines Seet.
A potential 8-12% hike in water tariffs for some regions in Indonesia covered by Moya would also prove positive for the group’s margins, he adds.
With more than $70 million cash still on the group’s balance sheet, Seet believes Moya is likely to continue acquiring and consolidating private water treatment players in Indonesia, which he says will further boost the group’s exponential growth going forward.
“With further cost savings, volume expansion, and the recovery of its NRW providing strong organic growth – coupled with additional acquisitions in the pipeline to further boost NPAT – we think the outlook is bright for Moya,” concludes the analyst.
As at 3.15pm, shares in Moya are trading flat at 10 cents or 1.91 times FY18F book.
