Water services industry restructuring has been progressing at six out of 11 states.
Water tariff setting mechanism is a key booster to water construction opportunities, demand for water pipes.
Engtex, Fitters, Taliworks (Not Rated) are worth monitoring.
Insights from Engtex, Fitters and Taliworks were interesting with Engtex and Fitters, now trading at 6.8x and 8.5x trailing PERs respectively, offering growth potential in the water pipe business. Catalysts will be a strong pick up in the pace of water restructuring in Selangor boosting pipe demand for Engtex and the commissioning of Fitters‟ new-technology PVC-O pipe plant alongside strong pipe orders domestically and overseas.
As for Taliworks, its recent JV with EPF signals more interesting developments in the pipeline, skewing towards infrastructure asset (likely highway) acquisitions which would provide more predictable cashflows to enhance its recurring earnings.
Source: Maybank Research - 20 Aug 2014
Water tariff setting mechanism is a key booster to water construction opportunities, demand for water pipes.
Engtex, Fitters, Taliworks (Not Rated) are worth monitoring.
What’s New
We hosted a Malaysia Water Conference in Kuala Lumpur on 13 August with Dato‟ Teo Yen Hua, CEO of National Water Services Commission (SPAN) as our keynote speaker. We also hosted three water-related corporates, namely i) Engtex Group, ii) Fitters Diversified, and iii) Taliworks Corporation. The conference was attended by 80 investors/participants.What’s Our View
The insights from SPAN was refreshing, detailing an „asset light‟ model to ensure sustainability of investment/capex in the water services industry. For this to happen, a full-cost recovery model is essential, which means that water tariff must go up continuously. A water tariff setting mechanism – which provides for a robust, stable and transparent framework for period tariff reviews – is the a key booster to water construction opportunities and demand for water pipes over the longer term, in our view.Insights from Engtex, Fitters and Taliworks were interesting with Engtex and Fitters, now trading at 6.8x and 8.5x trailing PERs respectively, offering growth potential in the water pipe business. Catalysts will be a strong pick up in the pace of water restructuring in Selangor boosting pipe demand for Engtex and the commissioning of Fitters‟ new-technology PVC-O pipe plant alongside strong pipe orders domestically and overseas.
As for Taliworks, its recent JV with EPF signals more interesting developments in the pipeline, skewing towards infrastructure asset (likely highway) acquisitions which would provide more predictable cashflows to enhance its recurring earnings.
Source: Maybank Research - 20 Aug 2014
没有评论:
发表评论