SINGAPORE (Mar 2): RHB is maintaining Moya Holdings Asia on “buy”, saying the year is going to be a “superb year” for the group.
The research house is looking foward to acquisitions, the extension of sxpiring concessions as well as full accretion of its Acquatico acquisition.
However, RHB has lowered its target price to 15 cents from 17 cents previously to factor a 10% lower FY18 NPAT after accounting for higher amortisation and financing costs, based on management’s latest guidance.
In a Friday report, analyst Jarick Seet says he sees more acquisitions to come for the group, especially given its healthy revenue generation momentum that leads RHB to expect about $80 million in cash to be generated from its operations in FY18, as well as more than $100 million of cash still on Moya’s balance sheet.
“This would allow the company to either lower its gearing or enable it to funds its operations to reduce its non-revenue water (NRW), as well as further acquisitions ahead,” says Seet.
In his view, Moya is likely to continue acquiring and consolidating Indonesian private water treatment players, which would further boost the group’s earnings growth going forward.
The internal rate of returns (IRRs) for a water project in Indonesia are attractive at typically around 15%, says Seet, which is double than that of a similar project in China.
“With planned expansion of capacity in two of its existing water plants, Bekasi and Tangerang, coupled with additional capex to reduce NRW in the next five years, this would help to ensure strong organic growth for Moya,” notes the analyst.
“With further cost savings, volume expansion and the recovery of its NRW providing strong organic growth – and possibly, additional acquisitions in the pipeline to further boost NPAT, we think the outlook is bright for Moya,” he concludes.
As at 2.32pm, shares in Moya are trading 1.1% lower at 9 cents.
