SINGAPORE (Sept 4): RHB Research is initiating coverage of Moya Holdings Asia with a “buy” call and a target price of 17 cents – implying an upside of more than 40% from its current trading price.
“Moya is the only listed proxy to Indonesia’s water treatment sector, and has become the largest water treatment player in terms of capacity after its acquisition of Acuatico,” says analyst Jarick Seet in a Monday report.
According to Seet, this is especially sweet as a water project in Indonesia typically yields an internal rate of return (IRR) at close to 15% – double that of a similar project in China.
And with a war chest of more than $60 million, Moya could continue with its acquisition spree.
“We think that over the near term, there could be more potential acquisitions in the pipeline, which would further boost its explosive growth going forward,” says Seet.
Moya’s water treatment business is also supported by the Indonesian government, which has pledged to reach 100% access to safe water and sanitation by 2019, from the current 67% and 59.71%, respectively.
In addition, Seet says a reduction in non-revenue water (NRW) that fails to reach the masses due to leakages would boost Moya’s topline and margins extensively.
According to Seet, only 53% of Acuatico’s water currently reaches the masses. “The remaining 47% of leakages can actually boost net profit after taxes (NPAT) substantially if more of this NRW can be recovered and sold,” he adds.
Further, Seet expects Moya’s 3-year NPAT from FY16-18F to improve at a compound annual growth rate of 243%.
The way Seet sees it, Moya is “substantially undervalued” due to the multitude of positives coming through the pipeline.
The stock is currently trading at 9x FY18F P/E, significantly lower than its peers’ average of 15.4x P/E.
As at 3.16pm, shares in Moya are trading 0.2 cent lower at 11.6 cents.
