Moya Holdings Asia

Moya Holdings Asia | Buy

Nov 5 close: S$0.069

Target price: S$0.11

RHB Research, Nov 5

Topline for the first nine months of 2018 surged 181 per cent with profit after tax and minority Interests (Patmi) growing 185 per cent to S$22.9 million, mainly contributed by Aquatico's acquisition in 2017. We understand that organic water sales trended up as well partially due to the reduction of non-revenue water (NRW) on Aquatico. The repayment of the debt from proceeds from the rights issue would result in about S$1 million interest cost savings in Q4 2018.

Moya intends to use part of the rights issue proceeds for mergers and acquisitions. We understand it is in the midst of negotiating with a few parties, and management is optimistic for one acquisition to be completed by end-2018. Based on its track record, we expect the acquisition to be accretive, and will likely provide another boost for FY19 forecasted PATMI.

Maintain "buy". This is from lower financing costs, concession extensions and recovery of NRW to provide strong organic growth, and additional accretive acquisitions in the pipeline to further boost net profit after tax. However, with the further depreciation of the Indonesian rupiah, and uncertainty surrounding the macroeconomic environment, we lower our TG (terminal growth) from 2.8 per cent to 2 per cent, resulting in a lower discounted cash flow-backed target price to S$0.11, from S$0.13.

Key risk includes changes in government regulations.

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