Moya Holdings Asia --  the only listed water business in Indonesia and the only Indonesian water play on the SGX -- has just reported 4Q17 results that, on the surface, look dismal. But it's not.

simonMelhem3.18Simon Melhem, executive director, Moya Holdings at the FY17 results briefing.
Photo by Leong Chan Teik
4Q17 saw a net loss of S$368,000 despite a 343% surge in revenue to S$50.5 million.

The topline surge reflected Moya's acquisition in mid-July 2017 of Acuatico, which operates a water concession in Jakarta.

As for the net loss -- it did not mean that it's a dismal performance by Moya, now the largest water company in Indonesia (by production capacity, of 14,000 litres per second) and transformed from being a relatively unknown small-cap company.


aeration2.18@ Moya's water treatment plant: Water from the river cascades down like fountains and is in the process aerated. This increases its oxygen saturation, removes carbon dioxide, and oxidizes soluble iron and manganese to insoluble precipitates. File photo.1. Strong cashflow: Moya, in 4Q17, enjoyed very strong cashflow.

It reported S$10.9 million in net operating cashflow. If you add back about S$9.3 million in construction costs for a Build-Operate-Transfer water plant, the operating cashflow of its water business was S$20 million.

Thus on an annualised basis, going into 2018, the operating cashflow from this stable business is roughly S$80 million.

Moya Holdings

Stock price:
 9.5 c

Target: 15 c

  Source: RHB

2. Leaking pipes: The technical term for this is "non-revenue water". The percentage of non-revenue water in the Acuatico concession is high at around 42%.

That is, 42% of the water produced doesn't get billed because it leaked while being transmitted through a network of pipes or, to a smaller degree, it was stolen.

Replacing leaking pipes over a number of years will consume a waterfall of cashflow from the business but the returns will be massive.

Every 1 percentage point decrease in non-revenue water will boost Moya’s bottom line by about US$2 million.

Stock price 

9.5 cents

52-week range

7 - 13 cents

PE (ttm)

34

Market cap

S$266 million

Shares outstanding

2.8 billion

Dividend yield
(ttm)

-

1-year return

42%

Source: Bloomberg

3. M&A: Controlled by the Salim Group, Moya is actively seeking M&As, which will likely tap into the operating cashflow and the S$101.5 million cash sitting on Moya's balance sheet.

That's why no dividend payout is contemplated in the near term.

Moya, as at 31 December 2017, had total borrowings of S$389.7 million. It is exploring fund-raising activities to strengthen its balance sheet as well as to fund future growth.

4. One-off costs: The 4Q17 numbers contain some one-off expenses arising from the Acuatico acquisition. 

These expenses bumped up administrative expenses to S$11.2 million but management guided that, on a steady state, it would be around S$8m a quarter.

Ditto for finance costs: 4Q17 clocked S$9.8 million but the steady number is around S$7 million a quarter.

The finance costs are largely attributable to the US$275 million loan that Moya took to help pay for the Acuatico purchase.

5. Gross profit margin: This improved from 32.6% in FY2016 to 41.5%. At that level, the business is a highly profitable one. 

Forecasts & Valuation

Dec-16

Dec-17

Dec-18F

Dec-19F

Total turnover (SGDm)

21

137

214

231

Net profit (SGDm)

3.2

7.7

27.6

31.4

Dividend

-

-

-

-

Return on average equity (%)

3.4

6.2

20.8

19.3

Source: RHB


For more on the FY17 results, click on press release here.
RHB's full report is here.


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