ttw pcl ttw tb neutral valuationttw.listedcompany.com/misc/analystreport/20200702-ttw-ks... ·...

2 July 2020 1 TTW PCL

Investment highlights

► Among the largest private tap water operators with a diversified customer

mix. TTW together with its subsidiaries PTW and BIE has total capacity of 1,076k

cubic meters per day (cum/day). It supplies tap water in Nakhon Pathom, Samut

Sakhon, Pathum Thani, and Ayutthaya provinces. TTW supplies 49% of total tap

water sales to the residential sector and 34% to industrial users and 17% to

commercial users. The residential sector has growth of water usage according to

population and urbanization. Residential demand provides a base for water sales

volume and provides a cushion during periods of economic slowdown, as sector

demand is less sensitive to GDP. For the industrial and commercial sectors are linked

to provincial GDP. Key clients for industrial users are the food and beverage

segment.

► Combination of less risky assets and high potential growth assets. TTW

(540k cum/day) has the lowest risk in TTW’s water portfolio. It operates under a

Build-Own-Operate (BOO) scheme and provides the company stable cash flow with

sufficient facility for future growth. Based on current location, TTW could expand

capacity by 300k cum/day. PTW (488k cum/day) is a wild card for TTW as it has

the right to negotiate for rental production facility from PWA after end of the Build-

Own-Operate-Transfer (BOOT) contract ends in 2023. PTW has the right to

negotiate to rent the plant from PWA two times each for a 10-year period. Rental

conditions have yet to be concluded, but PTW is required to submit a proposal any

time from Oct 2022 to April 2023. BIE (48k cum/day) supplies tap water for

industrial users in Bangpa-in Industrial Estate, where electronic, automotive parts,

plastic and consumer goods factories are located. Demand for these products are

expected to resume in line with an economic upturn.

► Diversified portfolio of power and water. Besides providing tap water and

waste water treatment services, TTW invested in a 25% stake of CKP. As a result,

TTW has a power capacity of 234 MW comprising 82% hydropower plants, 16%

gas-fired power plants, and 2% solar power plants. As Q3 is the peak season for

hydropower plants, earnings should be the peak quarter.

Valuation and Recommendation

► Initiate coverage with a Neutral rating and DCF-based TP of Bt13.30. TTW

trades at a 2021 PER of 15.4x, a premium compared to the sector average of 13.4x

to reflect its strong financial position with positive FCF, low D/E, and a high ROE.

TTW PCL

Dependent on water levels ► TTW is the largest private tap water operator with capacity of 1,076k

cum/day and a diversified mix of residential and industrial clients.

► Diversified portfolio of power and water. TTW owns a 25% stake of CKP,

a hydropower, gas-fired and solar power plant operator.

► Initiate coverage with a Neutral rating and TP of Bt13.30. An extension of

PTW’s contract could be a long-term earnings growth driver.

►

TTW TB Neutral

Target Price Bt 13.30

Price (01/07/2020) Bt 13.00

Upside % 2.31

Valuation DCF

Sector Energy & Utilities

Market Cap Btm 51,870

30-day avg turnover Btm 93.27

No. of shares on issue m 3,990

CG Scoring Excellent

Anti-Corruption Indicator N/A

Investment fundamentals

TTW TB rel SET performance

Source: Bloomberg

(all figures in THB unless noted)

Analyst Ornmongkol Tantitanatorn [email protected]

2 July 2020

Kasikorn Securities Public Company Limited

Year end Dec 31 2019A 2020E 2021E 2022E

Company Financials

Revenue (Btmn) 5,993 6,010 6,067 6,238

Core profit (Btmn) 3,040 3,054 3,365 3,482

Net profit (Btmn) 3,128 3,058 3,365 3,482

Net EPS (Bt) 0.78 0.77 0.84 0.87

DPS (Bt) 0.60 0.65 0.72 0.74

BVPS (Bt) 3.28 3.44 3.64 3.79

Net EPS growth (%) 10.06 -2.25 10.04 3.50

ROA (%) 13.54 13.31 14.65 15.77

ROE (%) 24.63 22.80 23.81 23.50

Net D/E (x) 0.47 0.34 0.22 0.10

Valuation

P/E (x) 17.60 16.96 15.42 14.90

P/BV (x) 4.21 3.77 3.57 3.43

EV/EBITDA (x) 12.28 11.21 10.87 10.31

Dividend yield (%) 4.35 5.00 5.54 5.69


Company Highlights

Largest private tap water producer in Thailand. TTW was incorporated in 2000. It provides tap

water in order to reduce water consumption from groundwater and reduce the risk of land collapsing. It

supplies water to 1) the Provincial Waterworks Authority (PWA) under a wholesale contract agreement.

PWA accounts for 97% of TTW’s total sales volume; and 2) industrial users in Bangpa-in industrial estate.

TTW supplies tap water in the central region of Thailand. It has a total capacity of 1,076k cum/day of

tap water, and 18k cum/day of waste water management.

TTW has a total sales volume market share of 60% in Nakhon Pathom and Samut Sakhon provinces,

while PTW has a 56% market share of water supply in Phathum Thani province. This implies that TTW

and PTW have a total tap water market share of 7% of in Thailand. TTW and PTW are the largest private

tap water suppliers in Thailand accounting for 16% of PWA’s total sales volume in 2019.

Fig 1 Water business Fig 2 Tap water supplier

Source: Company data, KS Research Source: Company data, KS Research

Fig 3 Tap water breakdown by supplier in Thailand Fig 4 PWA supplier breakdown by operator


Company TTW PTW TTW(BIE)

Business Tap water Tap water Tap Water/Waste water

Name Banglen Water Treatment Plant PathumThaniWater Treatment Plant Bangpa-in Industrial Estate

Krathumban Water Treatment Plant

Contract Type Build-own-operate (BOO) Build-own-operate-transfer (BOOT) Rights (Operating Lease)

Contract Period Jul 2004 - Jul 2034 Oct 1998 - Oct 2023 Aug 2009 - Aug 2039

Contract Customer Whole sale to PWA Whole sale to PWA Bangpa-in Industrial Estate

Distribution Area West Bangkok North Bangkok Ayutthaya

(Nakhon Pathom – Samut Sakhon) (Pathum Thani – Rangsit)

Design capacity 540 K CUM/day 488K CUM/day TW: 48K CUM/day

WW: 18K CUM/day

Raw water supply ThaChin River Chao Phraya River Chao Phraya River


Diversified customer mix. TTW supplies tap water up to 49% of total tap water sales to the residential sector, 34% to industrial users and 17% to commercial users. Residential sector growth depends on the population and urbanization, while the industrial and commercial sectors are linked to GDP. Key clients of industrial users are the food and beverage segment. Residential demand provides a base for water sales and provides a cushion during periods of economic slowdown, as sector demand is less sensitive to GDP. TTW (540k CUM/day) supplies tap water to Samut Sakhon and Nakhon Pathom provinces. Industrial user clients are in the food industry, i.e. Thai Union Group, Pataya Food Industries, and Pakfood, while key commercial customers are Mahidol University (Salaya) and Nadee Municipality (Waterworks). PTW (488k cum/day) supplies tap water to Pathum Thani province. Industrial user clients are in the food and beverage industry. i.e., Thainamthip Manufacturing, Greensport, and Pathumthani Brewery, while key commercial customers are Thammasat University (Rangsit), Future Park Rangsit, Rangsit University, Zeer Rangsit. BIE (48k cum/day) supplies tap water for industrial users in Bangpa-in Industrial Estate, Ayutthaya province, in which electronic, automotive parts, plastic and consumer goods factories are located.

Fig 5 TTW client breakdown Fig 6 TTW (only) client breakdown


Fig 7 PTW client breakdown Fig 8 BIE client breakdown


Fig 9 Country GDP and volume Fig 10 Growth in GDP and volume

Source: Company data, BOT, KS Research Source: Company data, BOT, KS Research


Resilient growth business. The tap water business has a high barrier to entry due to its being highly

capital intensive. TTW (company only) operates at a 80% plant run rate, while there is still demand

growth for water consumption. The Krathumban plant has sufficient area to expand up to 300k cum/day

that could serve the demand growth in the West of Bangkok from the current installed capacity of 540K.

TTW could invest Bt1bn for every 100k cum/day of capacity expansion. Construction of a new capacity

line would take a year, which could occur in case water demand growth exceeds its plant’s maximum run

level of 90%.

Fig 11 Resilient revenue growth Fig 12 Plant run rate


Fig 13 Service area in Samut Sakhon-Nakhon Pathom Fig 14 Service area in Pathum Thani-Rangsit



PTW to negotiate to extend its contract. PTW has total capacity of 488k cum/day. PTW accounted

for 32% of 2019 sales, 30% of 2019 net profit and 45% of total capacity. It operates under the BOOT

scheme, under which it required to transfer tap water distribution to PWA in Oct 1998 and transfer the

tap water production plant in Oct 2023. However, PTW has the right to negotiate to rent the production

plant from PWA twice, each for a period of 10 years. PTW is required to submit a proposal regarding this

from Oct 2022 to April 2023. However, conditions to negotiated have yet to be concluded. We expect the

terms of the rental will include 1) rental rate; 2) the term, whether 10 year each time or a combined 20-

year period, and; 3) the potential to expand capacity, as the current plant run rate hit 84% in 2019.

Management has set the condition for any investment to have an EIRR of at least 15%.

We assume the company will extend the contract for 20 years based on a rental rate assumption of

Bt0.7bn per year, which would provide equal returns for both PWA and PTW (Scenario 5). However we

foresee potential downside of Bt01.3/shr if PTW does not extend the contract (Scenario 1). We foresee

potential downside to our target price of Bt0.4/shr if the rental term is for 10 years (Scenario 2). We

estimate upside to our target price of Bt0.1/shr if the term is 20 years and PTW can increase capacity

from 488k cum/day to 588k cum/day (Scenario 7) on continued demand growth for water in Pathum

Thani, plus the current facility run rate of 84% in 2019 almost hit the peak level of 90%. Under the best

case, there could be upside to our target price of Bt1/shr if the term is for 20 years, PTW can increase

capacity from 488k cum/day to 588k cum/day, and PTW’s return remains the same as the current level.

(Scenario 11). We do not assume capacity expansion as our base case due to limited facility to expand

in the current location.

Fig 15 Sensitivity of PTW’s rental negotiation conditions

Source: Company data, KS Research

Diversified to the power business. TTW is not only a water operator but also invests in the power

generation business. TTW entered the power business in 2011 and currently holds a 25% stake of CKP.

CKP has a total capacity of 938 MW comprising both conventional (16%) and renewable (84%) power

plants. It is located in both Thailand (18%) and Laos (82%). In 2019, the power business generated 9%

of TTW’s net profit. Its investment in CKP provides TTW both business diversification and earnings growth

for TTW as it recently started up a new plant in Laos last year.

Fig 16 Earnings contribution by business unit Fig 17 Capacity - CKP


Senario (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Return to PWA:PTW

50%:50% 50%:50% 50%:50% 50%:50% 17%: 83% 17%: 83% 17%: 83% 17%: 83%

PTW capacity expansion No No No No No Yes Yes No No Yes Yes

No of year contract extened 0Yr 10Yr 20Yr 10Yr 20Yr 10Yr 20Yr 10Yr 20Yr 10Yr 20Yr

TTW 8.26 8.26 8.26 8.26 8.26 8.26 8.26 8.26 8.26 8.26 8.26

PTW 0.86 0.90 0.92 1.75 2.19 1.71 2.23 2.34 3.07 2.31 3.18

BIE 0.57 0.57 0.57 0.57 0.57 0.57 0.57 0.57 0.57 0.57 0.57

CKP 2.45 2.45 2.45 2.45 2.45 2.45 2.45 2.45 2.45 2.45 2.45

Total 12.14 12.18 12.21 13.03 13.47 12.99 13.51 13.62 14.35 13.60 14.46

Net debt (0.14) (0.14) (0.14) (0.14) (0.14) (0.14) (0.14) (0.14) (0.14) (0.14) (0.14)

Target price(Bt/sh) 12.00 12.00 12.10 12.90 13.30 12.90 13.40 13.50 14.20 13.50 14.30

TP change from base case-Senario 5(Bt) -1.30 -1.30 -1.20 -0.40 0.00 -0.40 0.10 0.20 0.90 0.20 1.00

TP change from base case-Senario 5(%) -10% -10% -9% -3% 0% -3% 1% 2% 7% 2% 8%

Senario (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

NP-Yr2025 (Btmn) 2,973 3,161 3,161 3,737 3,737 3,737 3,737 4,138 4,138 4,138 4,138

CAGR 2020-25(%) -1% 1% 1% 4% 4% 4% 4% 6% 6% 6% 6%

NP change from base case-Senario 5(Btmn) (764) (577) (577) - - - - 401 401 401 401

NP change from base case-Senario 5(+/-) -20% -15% -15% 0% 0% 0% 0% 11% 11% 11% 11%

Equal return Same as currentService contract

10% of revenue


Financial Highlights

We expect TTW to post a steady 2020-2025 earnings growth CAGR of 6%, or from Bt3.1bn in 2020 to

Bt4.1bn in 2025, on higher earnings growth from the water business and a higher contribution from the

power generation business. The water business has growth potential from both 1) demand growth in

Thailand on a long-term economic recovery. We expect total TTW & PTW sales volume to rise from

328mn cum in 2020 to 368 mm cum in 2025, or a CAGR of 2%; and 2) lower financial costs, as TTW has

no major investment plan and has stable cash flow from its existing business. We expect its financial cost

will decline from Bt274mn in 2020 to Bt97mn in 2025.

TTW’s power business (CKP, 25% stake), is expected to grow in 2020 on 1) a full-year contribution from

the Xayaburi (XPCL) plant. XPCL is a hydropower plant located in Laos that commenced commercial

operation in Oct 2019. XPCL will boost in 2019 CKP’s operating capacity from 456 MW to 938 MW.

Moreover, the water level should return to a normal level from the low this year; and 2) a lower cost of

natural gas due to the global demand slowdown and a change in OPEC’s strategy that resulted in lower

crude oil prices. Thailand’s price of natural gas lags changes in crude oil prices, and therefore it should

widen SPP operator margins. CKP operates two gas-fired power plants with capacity of 154 MW, or 16%

of total operating capacity. We expect an improvement in CKP’s earnings will result in a higher share

profit for TTW from Bt291mn in 2020 to Bt736mn in 2025, or a CAGR of 20%.

TTW has a relatively stable earnings outlook with outstanding ROE together with a low capex plan, and

thus we expect it will maintain a positive FCF position and that its net D/E ratio will continue to fall from

0.3 x expected in 2020 to net cash in 2023.

Fig 18 Revenue and cost breakdown by customer Fig 19 Cost breakdown


Fig 20 Revenue and share profit breakdown Fig 21 Water capacity and run rate


Fig 22 B/S Fig 23 Cash flow



Valuation

Our fair value of Bt13.30 is derived from the SOTP method for each project using the DCF methodology

and cost of equity of 8.1% (or WACC of 5.7%). The discount rate is derived from its 3-year average

historical trading level.

Fig 24 SOTP breakdown by project


Fig 25 Implied cost of equity Fig 26 TH and US bond yield


Fig 27 CK-TTW share price spread Fig 28 TTW-CKP share price spread


Project Business Type Location Contract Type Status

(K CUM/day) (MW) (Btmn) (Bt/sh)

Water

TTW Tap water NakhonPathom,SamutSakhon 540 BOO 100% Operating 32,964 8.26

PTW Tap water PathumThani 488 BOOT 98% Operating 8,741 2.19

BIE Tap water Ayutthaya 48 Rights (Operating Lease) 100% Operating

Waste water Ayutthaya 18 Rights (Operating Lease) 100% Operating 2,257 0.57

Power

CKP Hydro, Gas , Solar Thailand, Laos 234 IPP,SPP,VSPP 25% Operating 9,794 2.45

Total 53,756 13.47

Net debt/cash (559) (0.14)

Target price 53,196 13.30

TP: Mid -2021Capacity Holding

stake


Fig 29 Share price performance and financial data Fig 30 Share price performance and financial data

Source: Bloomberg, KS Research Source: Bloomberg, KS Research

Fig 31 12-month forward PER Fig 32 12-month forward PBV


Fig 33 Dividend yield Fig 34 Dividend yield gap


Fig 35 Utilities sector - water


Price (Bt) Target price Upside

01-Jul-20 (Bt) (%) 2020E 2021E 2020E 2021E 2020E 2021E 2020E 2021E 2020E 2021E

EASTW OP 10.20 11.90 16.7 16.7 14.9 1.5 1.5 -2.5 11.6 4.1 4.7 9.3 10.0

TTW N 13.00 13.30 2.3 17.0 15.4 3.8 3.6 -2.2 10.0 5.0 5.5 22.8 23.8

WHAUP OP 4.64 5.30 14.2 12.4 9.7 1.3 1.2 -32.8 26.9 3.4 4.3 10.4 12.4

Simple Average 15.3 13.4 2.2 2.1 -12.5 16.2 4.2 4.9 14.2 15.4

ROE (%)P/E (x) P/BV (x)Stock Rating

Net profit grth (%) Div. yield (%)


Key risks and concerns

Disparity between raw water concession and selling contract. TTW has a 25-year concession

until 2030 from the Ministry of Natural Resources and Environment to pump raw water from the Thachin

River to produce tap water. However, it has a tap water sales agreement with the Provincial Waterworks

Authority to supply tap water for 30 years until 2034.

Rise in raw water cost from a potential Water Act could increase raw water cost. TTW and

PTW pump water from the Thachin River and Chao Phraya River at no cost for tap water production.

There could be a Bt0.5/cum charge for water usage if the Water Act were passed. However, a public

hearing would be required to pass a Water Act. It would take another 2-3 years after the Act is passed

before it could be implemented. By that time, PTW would reach the end of its contract period, while TTW

are under an OEM contract, could pass through additional costs to PWA.

Lack of new growth drivers and uncertainly over PTW contract renewal. TTW has strong

positive cash flow with a high ROE of 25% in 2019. However, it has no major expansion plan for long-

term growth. The water business mainly serves the domestic market, and it has no overseas operations.

Selling price is directly linked to CPI. A lower energy cost resulting from OPEC’s change strategy

could negatively impact TTW’s earnings, as TTW’s average selling price is linked to CPI of the central

region in December for the first 300k cum/day and the rest is linked to CPI of the central region in

November. PTW’s selling price is linked to the country’s CPI in July. TTW and PTW’s sales volume

accounted for 51% and 46% of 2019 sales volume, respectively, while the rest is supplied to Bangpa-in

Industrial Estate, the selling price for which is regulated by the Industrial Estate Authority of Thailand.

Fig 36 Sensitivity to CPI Fig 37 Sensitivity to volume


Fig 38 Sensitivity to FX


Current assumption 2020 2021 2022 2023 2024 2025

CPI 102 102 103 103 103 103

Sales (Btmn) 6,010 6,067 6,238 6,382 6,490 6,556

Net Profit (Btmn) 3,058 3,365 3,482 3,631 3,746 3,737

Core profit (Btmn) 3,054 3,365 3,482 3,631 3,746 3,737

TP (Bt/sh) 13.3

10% drop in CPI 2020 2021 2022 2023 2024 2025

CPI 92 92 93 93 93 93

Sales (Btmn) 6,010 5,579 5,650 5,785 5,884 5,944

Net Profit (Btmn) 3,058 2,995 3,031 3,172 3,288 3,274

Core profit (Btmn) 3,054 2,995 3,031 3,172 3,288 3,274

TP (Bt/sh) 11.7

(+/-) 2020 2021 2022 2023 2024 2025

CPI -10% -10% -10% -10% -10% -10%

Sales (Btmn) 0% -8% -9% -9% -9% -9%

Net Profit (Btmn) 0% -11% -13% -13% -12% -12%

Core profit (Btmn) 0% -11% -13% -13% -12% -12%

TP (Bt/sh) -12%


Volume-water(mn CUM) 328 336 348 355 363 368

Sales (Btmn) 6010.2 6,067 6,238 6,382 6,490 6,556

Net Profit (Btmn) 3057.5 3,365 3,482 3,631 3,746 3,737

Core profit (Btmn) 3054.2 3,365 3,482 3,631 3,746 3,737

TP (Bt/sh) 13.3

10% drop in volume 2020 2021 2022 2023 2024 2025

Volume-water(mn CUM) 296 302 313 320 326 331

Sales (Btmn) 5594 5,643 5,798 5,929 6,026 6,085

Net Profit (Btmn) 2798.5 3,101 3,210 3,351 3,522 3,510

Core profit (Btmn) 2795.2 3,101 3,210 3,351 3,522 3,510

TP (Bt/sh) 12.6

(+/-) 2020 2021 2022 2023 2024 2025

Volume-water(mn CUM) -10% -10% -10% -10% -10% -10%

Sales (Btmn) -7% -7% -7% -7% -7% -7%

Net Profit (Btmn) -8% -8% -8% -8% -6% -6%

Core profit (Btmn) -8% -8% -8% -8% -6% -6%

TP (Bt/sh) -5%


FX- THB/USD(End) 31.5 31.5 31.5 31.5 31.5 31.5

Sales (Btmn) 6,010 6,067 6,238 6,382 6,490 6,556

Net Profit (Btmn) 3,058 3,365 3,482 3,631 3,746 3,737

Core profit (Btmn) 3,054 3,365 3,482 3,631 3,746 3,737

TP (Bt/sh) 13.3

10% appreciated in THB/USD 2020 2021 2022 2023 2024 2025

FX- THB/USD(End) 28.3 28.3 28.3 28.3 28.3 28.3

Sales (Btmn) 6,010 6,067 6,238 6,382 6,490 6,556

Net Profit (Btmn) 3,016 3,291 3,408 3,556 3,671 3,664

Core profit (Btmn) 3,020 3,291 3,408 3,556 3,671 3,664

TP (Bt/sh) 13.1

(+/-) 2020 2021 2022 2023 2024 2025

FX- THB/USD(End) -10% -10% -10% -10% -10% -10%

Sales (Btmn) 0% 0% 0% 0% 0% 0%

Net Profit (Btmn) -1% -2% -2% -2% -2% -2%

Core profit (Btmn) -1% -2% -2% -2% -2% -2%

TP (Bt/sh) -2%


Company profile

Water business – TTW’s water supply and management business supplies tap water to the PWA with

a 30-year contract until 2034 in Nakhon Pathom and Samut Sakhon provinces. The plant pumps raw water from the Thachin River with a concession of 25 year until 2030 from the Ministry of Natural Resources and Environment. It has total capacity of 540k cum/day and is able to expand up to 840k cum/day. The plant operates under the BOO scheme, and thus it is not required to transfer its factory

and distribution pipe network to PWA. PTW supplies tap water to the PWA with a 25-year contract until

2023 in Pathum Thani province. The plant pumps raw water from the Chao Phraya River with a concession for 25 year until 2025. It has total capacity of 488k cum/day. The plant operates under the

BOOT scheme, and thus it is not required to transfer its factory to PWA in Oct 2023. However, PTW can

rent the plant from PWA twice, each time for a period of 10 years. It is required to submit its rental

proposal from Oct 2022 to April 2023. BIE supplies tap water and waste water management to industrial

users in Bang Pa-In Industrial Estate. It has a 30-year right to supply water and treated waste water

until 2039. The plant has total tap water capacity of 48k cum/day and waste water management of 18k

cum/day. The plant pumps raw water from the Chao Phraya River.

Fig 39 Capacity Fig 40 Production and run rate


Fig 41 Water production process



Power business – TTW entered the power generation business by investing in a 25.31% stake in CKP.

CKP’s power plant portfolio comprises 1) two hydropower plants with total capacity of 765 MW all located

in Laos; 2) two gas-fired power plant with total capacity of 154 MW located in Thailand; and 3) four

solar farm power plants with capacity of 19 MW all located in Thailand.

Fig 42 CKP portfolio breakdown by country Fig 43 CKP portfolio breakdown by fuel type


Fig 44 Revenue, GP and NP breakdown Fig 45 Shareholder structure

Source: Company data Source: Company data, KS Research


Source: Company, KS estimates

Year-end 31 Dec

Income Statement (Btmn) 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E Cashflow (Btmn) 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E

Revenue 5,474 5,807 5,993 6,010 6,067 6,238 6,382 6,490 6,556 Net profit 2,681 2,861 3,147 3,077 3,383 3,500 3,650 3,762 3,753

Cost of sales and services -1,564 -1,722 -1,795 -1,879 -1,983 -2,162 -2,218 -2,428 -2,512 Depreciation & amortization 980 1,062 1,121 1,295 1,371 1,494 1,507 777 837

Gross Profit 3,910 4,085 4,199 4,131 4,083 4,076 4,164 4,062 4,043 Change in working capital -240 25 6 40 5 1 -8 -6 3

SG&A -503 -529 -502 -522 -524 -530 -522 -341 -345 Others -3 -103 -297 -295 -615 -687 -693 -730 -736

Other income 273 141 172 141 145 149 147 150 153 CF from operation activities 3,417 3,844 3,977 4,117 4,144 4,308 4,456 3,803 3,857

EBIT 3,720 3,849 4,149 4,044 4,320 4,382 4,482 4,601 4,587 Capital expenditure -432 -53 -201 -276 -289 -121 -122 -129 -114

EBITDA 4,660 4,759 4,989 5,045 5,076 5,189 5,296 4,648 4,689 Investment in subs and affiliates 2,101 -1,158 -498 0 0 0 0 0 0

Interest expense -407 -372 -305 -274 -248 -191 -123 -101 -97 Others 66 42 52 55 184 331 387 387 405

Equity earnings 40 152 280 295 615 687 693 730 736 CF from investing activities 1,734 -1,168 -646 -221 -105 210 265 258 291

EBT 3,313 3,477 3,844 3,770 4,072 4,191 4,359 4,500 4,490 Cash dividend -2,394 -2,394 -2,394 -2,394 -2,594 -2,873 -2,953 -3,072 -3,192

Income tax -632 -616 -697 -694 -688 -691 -709 -738 -737 Net proceeds from debt -2,670 -481 -940 -796 -760 -2,460 -1,460 -460 -360

NPAT 2,681 2,861 3,147 3,077 3,383 3,500 3,650 3,762 3,753 Capital raising 0 0 0 0 0 0 0 0 0

Minority Interest -18 -19 -19 -19 -19 -18 -18 -15 -16 Others -17 -18 -19 0 0 0 0 0 0

Core Profit 2,693 2,878 3,040 3,054 3,365 3,482 3,631 3,746 3,737 CF from financing activities -5,081 -2,893 -3,353 -3,190 -3,354 -5,333 -4,413 -3,532 -3,552

Extraordinary items -30 -36 88 3 0 0 -0 -0 0 Net change in cash 71 -217 -23 706 685 -814 308 528 596

FX gain (loss) 0 0 0 0 0 0 0 0 0 Key Statistics & Ratios

Reported net profit 2,663 2,842 3,128 3,058 3,365 3,482 3,631 3,746 3,737 Per share (Bt)

Balance Sheet (Btmn) Reported EPS 0.67 0.71 0.78 0.77 0.84 0.87 0.91 0.94 0.94

Cash & equivalents 317 99 77 783 1,468 654 962 1,490 2,086 Core EPS 0.68 0.72 0.76 0.77 0.84 0.87 0.91 0.94 0.94

Accounts receivable 553 565 565 541 546 561 574 584 590 DPS 0.60 0.60 0.60 0.65 0.72 0.74 0.77 0.80 0.80

Inventories 23 28 27 30 30 31 32 32 33 BV 2.97 3.09 3.28 3.44 3.64 3.79 3.96 4.13 4.27

Total current assets 3,280 4,216 3,731 4,419 5,110 4,313 4,635 5,174 5,776 EV 14.41 12.36 12.55 14.18 13.82 13.41 12.98 12.73 12.50

Investment in subs & others 4,538 4,685 5,917 6,157 6,588 6,943 7,249 7,592 7,923 Free Cash Flow 0.75 0.95 0.95 0.96 0.97 1.05 1.09 0.92 0.94

Fixed assets-net 15,410 14,407 13,450 12,430 11,349 9,976 8,591 7,943 7,220 Valuation analysis

Total assets 23,277 23,330 23,158 23,067 23,107 21,292 20,536 20,770 20,980 Reported P/E (x) 18.58 15.02 14.03 16.96 15.42 14.90 14.28 13.85 13.88

Short-term debt 1,480 1,935 3,560 760 2,460 1,460 460 1,860 460 Core P/E (x) 18.37 14.83 14.44 16.98 15.42 14.90 14.28 13.85 13.88

Accounts payable 128 134 160 169 179 195 200 219 226 P/BV (x) 4.18 3.46 3.36 3.77 3.57 3.43 3.28 3.15 3.05

Total current liabilities 2,046 2,545 4,165 1,386 3,096 2,115 1,121 2,526 1,136 EV/EBITDA (x) 12.34 10.37 10.04 11.21 10.87 10.31 9.78 10.93 10.63

Long-term debt 9,190 8,256 5,696 7,700 5,240 3,780 3,320 1,460 2,500 Price/Cash flow (x) 14.48 11.11 11.04 12.60 12.52 12.04 11.64 13.64 13.45

Total liabilities 11,399 10,966 10,033 9,259 8,509 6,068 4,614 4,159 3,809 Dividend yield (%) 4.84 5.61 5.45 5.00 5.54 5.69 5.92 6.15 6.15

Paid-up capital 3,990 3,990 3,990 3,990 3,990 3,990 3,990 3,990 3,990 Profitability ratios

Share premium 2,638 2,638 2,638 2,638 2,638 2,638 2,638 2,638 2,638 Gross margin (%) 71.42 70.34 70.06 68.74 67.31 65.34 65.24 62.59 61.68

Retained earnings 3,700 4,148 4,884 5,547 6,318 6,928 7,606 8,280 8,826 EBITDA margin (%) 85.12 81.95 83.25 83.94 83.66 83.19 82.98 71.62 71.52

Minority interests 42 43 44 63 82 100 118 133 149 EBIT margin (%) 67.95 66.27 69.22 67.29 71.20 70.25 70.22 70.89 69.97

Total shareholders' equity 11,878 12,365 13,125 13,808 14,597 15,225 15,922 16,611 17,172 Net profit margin (%) 48.97 49.26 52.51 51.19 55.76 56.11 57.18 57.96 57.24

Total equity & liabilities 23,277 23,330 23,158 23,067 23,107 21,292 20,536 20,770 20,980 ROA (%) 10.93 12.28 13.54 13.31 14.65 15.77 17.45 18.21 17.98

Key Assumptions ROE (%) 22.83 23.53 24.63 22.80 23.81 23.50 23.48 23.21 22.31

CPI 101 102 103 102 102 103 103 103 103 Liquidity ratios

Current ratio (x) 1.60 1.66 0.90 3.19 1.65 2.04 4.13 2.05 5.09

Capacity- power (MW) 106 106 234 234 234 234 234 234 234 Quick ratio (x) 1.58 1.64 0.88 3.14 1.63 2.01 4.08 2.02 5.03

Capacity- Water (k CUM/day) 1,094 1,094 1,094 1,094 1,094 1,094 1,094 1,094 1,194 Leverage Ratios

-Tap water 98% 98% 98% 98% 98% 98% 98% 98% 98% D/E ratio (x) 0.96 0.89 0.76 0.67 0.58 0.40 0.29 0.25 0.22

-Water treatment 2% 2% 2% 2% 2% 2% 2% 2% 2% Net debt/EBITDA (x) 1.72 1.39 1.23 0.92 0.63 0.30 -0.04 -0.26 -0.46

Net debt/equity (x) 0.67 0.53 0.47 0.34 0.22 0.10 -0.01 -0.07 -0.13

Volume-power (mn unit) 400 539 511 1,050 1,130 1,130 1,130 1,130 1,130 Int. coverage ratio (x) 9.14 10.35 13.62 14.76 17.42 22.89 36.38 45.56 47.27

Volume-water (mn CUM) 295 318 329 328 336 348 355 363 368 Growth

-Tap water 98% 98% 98% 98% 98% 98% 98% 98% 98% Revenue (%) 3.88 6.08 3.20 0.28 0.94 2.82 2.31 1.68 1.02

-Water treatment 2% 2% 2% 2% 2% 2% 2% 2% 2% EBITDA (%) 5.53 2.13 4.85 1.11 0.61 2.24 2.06 -12.25 0.88

Reported net profit (%) 7.58 6.71 10.06 -2.25 10.04 3.50 4.27 3.17 -0.24

Reported EPS (%) 7.58 6.71 10.06 -2.25 10.04 3.50 4.27 3.17 -0.24

Core profit (%) 8.31 6.86 5.62 0.47 10.16 3.50 4.27 3.17 -0.24

Core EPS (%) 8.31 6.86 5.62 0.47 10.16 3.50 4.27 3.17 -0.24


Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject security(ies) and subject company(ies); and

no part of the compensation of the research analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in

the report.

Investment Ratings

Outperform : Expected total return of 10% or more within a 12-month period

Neutral : Expected total return between -10% and 10% within a 12-month period

Underperform : Expected total return of -10% or worse within a 12-month period

General Disclaimer

This document is prepared by Kasikorn Securities Public Company Limited (“KS”). This document has been prepared for individual clients of KS only and must

not, either in whole or in part, be copied, photocopied or duplicated in any form or by any means or distributed to any other person. If you are not the intended

recipient you must not use or disclose the information in this research in any way. If you received it in error, please immediately notify KS by return e-mail and

delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other

person.

This document, including information, data, statements, forecasts, analysis and projections contained herein, including any expression of opinion, is based on

public available information or information obtained from sources believed to be reliable, but KS does not make any representation or warranty on, assumes no

responsibilities for nor guarantees the accuracy, completeness, correctness or timeliness of such information. KS accepts no obligation to correct or update the

information or opinions in it. The statements or expressions of opinion herein were arrived at after due and careful consideration and they were based upon

such information or sources then, and in our opinion are fair and reasonable in the circumstances prevailing at the time. The information or expressions of

opinion contained herein are subject to change without notice.

Nothing in this document shall be construed as an offer or a solicitation of an offer to buy or sell any securities or products, or to engage in or refrain from

engaging in any transaction. In preparing this document, KS did not take into account your specific investment objectives, financial situation or particular needs.

This document is for your information only and is not to be taken in substitution for the exercise of your judgment. KS salespeople, traders and other

professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions which are contrary to the opinions

expressed in this document. Before making an investment decision on the basis of this document, you should obtain independent financial, legal or other advice

and consider the appropriateness of investment in light of your particular investment needs, objectives and financial circumstances. There are risks involved in

the investment in securities. KS accepts no liability whatsoever for any direct, indirect, consequential or other loss (including claim for loss of profit) arising from

any use of or reliance upon this document and/or further communication given in relation to this document.

Any valuations, opinions, estimates, forecasts, projections, ratings or risk assessments herein constitute a judgment as of the date of this document, and there

can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, projections, ratings or risk

assessments. Any valuations, opinions, estimates, forecasts, projections, ratings or risk assessments described in this document were based upon a number of

estimates and assumptions and are inherently subject to significant uncertainties or contingencies. It can be expected that one or more of the estimates on

which the valuations, opinions, estimates, forecasts, projections, ratings or risk assessments were based will not materialize or will vary significantly from actual

results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, projections, ratings or risk assessments described herein is not to be relied

upon as a representation and/or warranty by KS (i) that such valuations, opinions, estimates, forecasts, projections, ratings or risk assessments or their

underlying assumptions will be achieved, or (ii) that there is an assurance that future results or events will be consistent with any such valuations, opinions,

estimates, forecasts, projections, ratings or risk assessments stated therein.

KS along with its affiliates and/or persons associated with it may from time to time have interests in the securities mentioned in this document. KS and its

associates, their directors and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to

perform broking, investment banking, advisory and other securities services for companies mentioned in this document.

Corporate Governance Report Disclaimer

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the

Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of companies listed on the Stock Exchange of Thailand

and the Market of Alternative Investment disclosed to the public and able to be accessed by a general public investor at http://www.thai-

iod.com/en/publications-detail.asp?id=170 . The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based

on inside information.

The survey result is as of the data appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after

that date. KS does not confirm nor certify the accuracy of such survey result.

Structured Notes and Derivative Warrants Disclaimer

KS may be the issuer of structured notes on these securities.

KS acts as market maker and issuer of Derivative Warrants (“DWs”) on the underlying stocks listed below. Investors should carefully read the details of the DWs

in the prospectus before making any investment decisions.

DWs Underlying Stocks: ADVANC, AMATA, AOT, BANPU, BBL, BCH, BDMS, BEM, BGRIM, BH, BJC, BTS, CBG, CENTEL, CK, CKP, CPALL, CPF, CPN, EA, GPSC, GULF,

GUNKUL, HANA, HMPRO, IRPC, IVL, KKP, KTB, KTC, LH, MINT, MTC, OSP, PTG, PTT, PTTEP, PTTGC, QH, SCB, SCC, SPALI, SPRC, STA, STEC, TISCO, TOP, TRUE, TU,

VGI and WHA
http://www.thai-iod.com/en/publications-detail.asp?id=170http://www.thai-iod.com/en/publications-detail.asp?id=170

ttw pcl ttw tb neutral valuationttw.listedcompany.com/misc/analystreport/20200702-ttw-ks... ·...

Documents