SINGAPORE (Apr 9): RHB is maintaining its “buy” call on Moya Holdings Asia after Moya’s founding shareholder, Moya Holding, sold out its stake in the group.

In Jan, Moya Holding sold a stake to majority shareholder, Tamaris infrastructure at 10 cents each. This was followed by the April sale of the remaining stake to Gateway Partners -- a private equity fund which is now the substantial shareholder -- at 11 cents each or a 10% premium.

"We believe that this is a vote of confidence on the growth prospects of Moya," says lead analyst Jarick Seet in a Monday report, "We think the outlook is bright for the company and maintain our 'buy' call with an unchanged DCF-derived target price of 15 cents or 47% upside."

The vote of confidence by Gateway Partners, purchasing shares at a premium, also substantiates RHB's view even further given that typically private equity funds have an internal rate of return target to be achieved over a couple of years.

Meanwhile, Seet understands that the group’s management is currently in talks with the local water authority (PDAM) to extend to 27 years the concession for its Aquatico assets, which currently has seven more years remaining.

“We believe an extension would benefit Moya and it would lead to a re-rating of the stock,” says Seet.

In addition, Moya has secured an expansion amendment to the build-operate-transfer (BOT) cooperation agreement with PDAM in Tangerang, Indonesia, to expand the water supply capacity to 2,000 lps from the existing 950 lps.

The total pipe network to be installed would also be increased to 1,200km from 631km, while the cost of construction is expected to be around $110 million.

This project is scheduled to be completed by 2024 and the water sales contributions are expected to increase gradually by 200lps, which would contribute positively to the group’s topline and bottomline.

Looking ahead, the analysts reckon that more potential acquisitions could materialise as the group has more than $100 million of cash on its balance sheet.

“We believe Moya is likely to continue to acquire and consolidate the Indonesian private water treatment players, which would further boost its earnings growth. The company may also use part of its cash hoard to lower its debt and reduce its financing costs of $7 million per quarter currently,” says Seet.

Management is targeting to reach on overall 20,000 lps this year from 13,000 lps currently, which would give it a further advantage, especially when negotiating terms over a buyout of existing smaller players.

“With further cost savings, volume expansion and the recovery of its non-revenue water (NRW) providing strong organic growth – and possibly, additional acquisitions in the pipeline to further boost its earnings – we think the outlook is bright for Moya,” adds the analyst.

As at 10.28am, shares in Moya are trading at 10 cents or 1.95 times FY18 book.

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