PPWSA's 1H17 review: Top line soars 17.6% YoY; net profit declines on forex loss

Water subscriptions continue to rise

• Total number of water subscriptions continue to rise, increasing by 12,472 subscribers during the first half of 2017 or 4.0% compared to the end of 2016, and reached 321,772 subscribers at the end of June. Of the total new subscribers in 1H17, 11,524 were household clients, 810 commercial and industrial clients, and 138 houses “for rent to garment workers”. The increase in total subscriptions was quite stable, with the company gaining more than 4,000 new clients per quarter at least over the last two and a half years.

Top line soars 17.6% YoY in 1H17

• Total revenue in the first six months of 2017 came to KHR114.4bn, posting a 17.6% surge compared to the same period last year. The remarkable increase in revenue was driven by a solid growth in core water sales and a jump in income from construction services. Core water sales, which accounts for almost 86% of total revenue in 1H17, rose 10.7% YoY to KHR97.9bn thanks to the increase in total number of subscribers. Meanwhile, income from construction services jumped 123.3% from KHR3.4bn in 1H16 to KHR7.5bn in 1H17 as the company has recently been involved in a water pipeline construction project in Kampot province.

Operating profit surges on rising revenue; margins change slightly

• In 1H17, EBITDA rose 14.3% YoY to KHR55.99bn, while EBIT surged 20.0% YoY to KHR37.37bn. The increase in operating profit was mainly thanks to rising revenue, which is obvious as margins changed only slightly. EBITDA margin decreased 1.4%pts to 49.0%, but EBIT margin expanded slightly by 0.6%pts to 32.7%. This is confirmed by the growth in total operating expense of 16.5%, which is nearly as high as the revenue growth. Expense on construction service nearly doubled, while electricity, salaries, and raw materials for water connections, posted a double-digit increase.

Earnings decline 27.3% YoY on forex loss

• Despite a strong operating profit growth, net profit declined 27.3% to KHR14.6bn in 1H17 as net finance expense skyrocketed from KHR5.9bn in 1H16 to KHR18.7bn in 1H17. Change in net finance income/expense is significantly related to the fluctuation in foreign exchange loss or gain on borrowings.