SINGAPORE (Sept 26): RHB is reiterating its “buy” recommendation on Moya Holdings, the water treatment company, with a target price of 13 cents.

This came following a site visit to the group’s water treatment plants in Singapore, Seet came away positive on its outlook.

He believes that three main catalysts that are most likely to come by end-FY18 should be positive for the group.

The first catalyst is the potential incoming acquisitions.

Moya launched a rights issue in May, which raised $40 million and are targeted to fund the group’s M&A and expansion plans, as well as the management’s aim to reach 20,000 litres per second, compared to 13,000 litres per second currently.

In a Wednesday report, analyst Jarick Seet says expects the group to engage in an acquisition by the end of this year. And this should be immediately earnings-accretive.

The second catalyst is the restructuring and extension of renewal for Aquatico.

“We think any agreement of the restructuring will likely include an extension for the existing expiring concession,” says Seet. “We expect this extension to also come by the end of 2018.”

Aquatico’s concession has about five to seven years remaining for its portfolio and having this extended to 20-25 years will be positive for the group, as it can book much lower depreciation per year, while there will be an immediate increase to the value of the asset

The third catalyst is the group’s strong organic growth that is expected to drive FY19-20 earnings.

In Indonesia, only 22% of the population has access to clean piped water. Many still rely on higher-cost water sources, such as jerry cans, which can cost up to IDR 1,500 for 20 litres of water, compared to IDR 7 per litre for piped water.

The group’s management is also keen to drastically reduce non-revenue water (NRW) by more than 50% by 2020. This will boost revenues and margins as less cost is needed.

On Sept 12, Moya announced that it has secured the tender to build, operate and transfer (BOT) a water supply system in West Semarang, Indonesia, with its partner PT Medco Gas Indonesia.

The new water treatment plant facility will likely have production capacity of up to 1,000 litres per second, together with a transmission pipeline of up to 9.1km.

“We think the outlook is bright for Moya, and believe investors can accumulate the share for the long term,” says Seet.

As at 3.55pm, shares in Moya are trading at 8.3 cents or 1.2 times FY19 book.

Accumulate Moya for the long term: RHB

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Accumulate Moya for the long term: RHB

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