Disclaimer: This publication constitutes information disclosed to the public and believed to be reliable but its accuracy and completeness are not guaranteed. All opinions, suggestions, or projections are for informational purposes only and shall not be construed as an inducement for the sale or purchase of securities. Amendments to this publication may be made without prior notice. Investors are urged to exercise caution in making a decision to invest in any securities. COMPANY RESEARCH | Company Update 1 March 13, 2019 OUTPERFORM TTW (TTW TB) Share Price: Bt12.30 Target Price: Bt14.80 (+20.3%) A harvest year Raised FY19F water sales growth at TTW from 2% to 4% after stronger-than-expected sales in 2M19 (+7% yoy) Raised FY19-20F earnings by 3% on higher sales volume, lower electricity and interest costs, and 5-year BOI privilege for new plant OUTPERFORM, raised TP to Bt14.80 (from Bt14.50) after earnings upgrade; buy for 5% dividend yield Raised FY19F water sales volume growth at TTW from 2% to 4% We are more positive on TTW after it reported stronger than expected water sales at TTW (+7% yoy in 2M19 vs our 2% full-year estimate). This was supported by stronger demand from Provincial Waterworks Authority (PWA) as it had acquired tap water operations from local administration in Nakhon Pathom. The Interior Ministry has a policy for PWA to provide tap water service in 74 provinces nationwide where local administrations have limited capability. We also see sales growth in Samut Sakhon area, where most food manufacturers are located. The National Food Institute forecasts food exports would grow 8% yoy in FY19F after EU lifted yellow card status for Thailand for tackling illegal fishing, and stronger demand in CLMV markets. Food export growth has 64% correlation with TTW’s tap water sales growth as most of its customers are food exporters in Samut Sakhon. Expect FY19F/20F earnings to grow 7%/10% yoy We raised profit by 3% each in FY19/20F after (i) raising water sales growth at TTW from 2% to 4% (+Bt20m), (ii) trimming electricity cost at TTW (+Bt10m) as COD of new plant in Samut Sakhon in 2H19 would reduce water distribution distance (to 7 km from 51 km), (iii) reducing interest expense (+Bt60m) after Bt1.5bn debt repayment, and (iv) tax- saving from 5-year BOI privilege for the new plant (Bt35m p.a.). We now expect FY19F/20F profit to grow 7%/10% yoy led by revenue growth at TTW (4% p.a.) and PTW (3% p.a.), cost-savings at new plant, lower interest expense, and higher profit contribution from CKP (+56% yoy in FY19F) after Xayaburi hydropower project starts operation in 4Q19. OUTPERFORM, TP Bt14.80/sh; a defensive growth play TTW deserves to trade at a premium, at 16x FY19F P/E vs 15x for the SET. Although earnings growth (+7% yoy) is lower than the SET (+13%) in FY19F, its future cash flow is more resilient than overall market given a defensive business model. TTW offers higher dividend yield (5% vs 3% for the SET). TTW would not be exposed to the drought risk as it sources water supply from the irrigation system. Financial Summary (Btm) Year to Dec 2017 2018 2019F 2020F 2021F Sales (Btm) 5,595 5,926 6,103 6,284 6,438 Growth (%) 4.0 5.9 3.0 3.0 2.4 EBITDA (Btm) 4,647 4,748 5,042 5,168 5,269 Growth (%) 5.9 2.2 6.2 2.5 2.0 Net profit (Btm) 2,663 2,842 3,053 3,343 3,332 Growth (%) 7.6 6.7 7.4 9.5 (0.3) FDEPS (Bt) (Core) 0.67 0.71 0.77 0.84 0.84 Growth (%) 7.6 6.7 7.4 9.5 (0.3) PE (x) 18.4 17.3 16.1 14.7 14.7 DPS (Bt) 0.60 0.60 0.63 0.67 0.67 Yield (%) 4.9 4.9 5.1 5.4 5.4 BVPS (Bt) 3.0 3.1 3.2 3.4 3.6 P/BV (x) 4.15 3.98 3.80 3.59 3.42 Sunthorn THONGTHIP 662 - 659 7000 ext 5009 [email protected]Key Data 12-mth high/low (Bt) 13.0 / 11.5 Market capital (Btm/US$m) 49,077.0 / 1551.4 3m avg. turnover (Btm/US$m) 35.6 / 1.1 Free float (%) 54.6 Issued shares (m shares) 3,990 Major shareholders: -MITSUI & CO LTD 26.0 -CH KARNCHANG PCL 19.4 -BANGKOK EXPRESSWAY P 19.3 Share Price Performance YTD 1Mth 3Mth 12Mth Absolute (%) (0.8) (3.9) 0.0 (4.7) Relative to index (%) (4.9) (3.0) 0.4 4.9 Krungsri Securities vs Market Positive Neutral Negative Market Recommend 7 1 0 Krungsri Market % +/- Target Price (Bt) 14.8 14.2 4.2 ’19 Net Profit (Btm) 3,050 3,050 0.0 ’20 Net Profit (Btm) 3,343 3,409 (1.9) Krungsri's earnings revision 2019F 2020F Earnings revision (%) 3.4 2.7 Source: Bloomberg, Krungsri Securities
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Disclaimer: This publication constitutes information disclosed to the public and believed to be reliable but its accuracy and completeness are not guaranteed. All opinions, suggestions, or projections are for informational purposes only and shall not be construed as an inducement for the sale or purchase of securities. Amendments to this publication may be made without prior notice. Investors are urged to exercise caution in making a decision to invest in any securities.
A harvest year ���� Raised FY19F water sales growth at TTW from 2% to 4% after
stronger-than-expected sales in 2M19 (+7% yoy)
���� Raised FY19-20F earnings by 3% on higher sales volume, lower
electricity and interest costs, and 5-year BOI privilege for new plant
���� OUTPERFORM, raised TP to Bt14.80 (from Bt14.50) after earnings
upgrade; buy for 5% dividend yield Raised FY19F water sales volume growth at TTW from 2% to 4% We are more positive on TTW after it reported stronger than expected water sales at TTW (+7% yoy in 2M19 vs our 2% full-year estimate). This was supported by stronger demand from Provincial Waterworks Authority (PWA) as it had acquired tap water operations from local administration in Nakhon Pathom. The Interior Ministry has a policy for PWA to provide tap water service in 74 provinces nationwide where local administrations have limited capability. We also see sales growth in Samut Sakhon area, where most food manufacturers are located. The National Food Institute forecasts food exports would grow 8% yoy in FY19F after EU lifted yellow card status for Thailand for tackling illegal fishing, and stronger demand in CLMV markets. Food export growth has 64% correlation with TTW’s tap water sales growth as most of its customers are food exporters in Samut Sakhon. Expect FY19F/20F earnings to grow 7%/10% yoy We raised profit by 3% each in FY19/20F after (i) raising water sales growth at TTW from 2% to 4% (+Bt20m), (ii) trimming electricity cost at TTW (+Bt10m) as COD of new plant in Samut Sakhon in 2H19 would reduce water distribution distance (to 7 km from 51 km), (iii) reducing interest expense (+Bt60m) after Bt1.5bn debt repayment, and (iv) tax-saving from 5-year BOI privilege for the new plant (Bt35m p.a.). We now expect FY19F/20F profit to grow 7%/10% yoy led by revenue growth at TTW (4% p.a.) and PTW (3% p.a.), cost-savings at new plant, lower interest expense, and higher profit contribution from CKP (+56% yoy in FY19F) after Xayaburi hydropower project starts operation in 4Q19. OUTPERFORM, TP Bt14.80/sh; a defensive growth play TTW deserves to trade at a premium, at 16x FY19F P/E vs 15x for the SET. Although earnings growth (+7% yoy) is lower than the SET (+13%) in FY19F, its future cash flow is more resilient than overall market given a defensive business model. TTW offers higher dividend yield (5% vs 3% for the SET). TTW would not be exposed to the drought risk as it sources water supply from the irrigation system.
Financial Summary (Btm) Year to Dec 2017 2018 2019F 2020F 2021F
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 a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an assessment of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date or when there is any change to the relevant information. Nevertheless, Krungsri Securities Public Company Limited does not confirm, verify, or certify the accuracy and completeness of such survey result.
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The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assess ed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of th e Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company . The assessmen t result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, Krungsri Securities Public Company Limited does not confirm, v erify, or certify the accuracy and completeness of the assessment result." Reference Disclosure: Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Th ai CAC) under Thai Institute of Directors (as of July 31, 2017) are categorised into:
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