PPWSA 2022 Review: Bottom line declines despite solid growth of water sales
Equity Report / May 18, 2023
Performance Highlights
| FY ends Dec (KHRÕbn) | 4Q22 | % QoQ | % YoY | 2022 | % YoY |
|---|---|---|---|---|---|
| Revenue | 92.27 | 0.8% | 1.4% | 346.18 | -5.6% |
| EBITDA | 42.85 | -20.9% | -2.1% | 184.34 | -13.2% |
| EBIT | 28.01 | -28.8% | -3.5% | 124.88 | -20.5% |
| Finance cost | -3.46 | -27.7% | -35.7% | 5.63 | -35.7% |
| PBT | 24.54 | -29.0% | -25.8% | 130.52 | -21.3% |
| Net profit | 22.09 | -21.1% | 0.6% | 108.19 | -16.3% |
| EBITDA margin | 46.4% | -21.5%pt | -20.9%pt | 53.2% | -4.6%pt |
| EBIT margin | 30.4% | -29.4%pt | -28.8%pt | 36.1% | -6.7%pt |
| Net margin | 23.9% | -21.7%pt | -21.1%pt | 31.3% | -4.0%pt |
Source: YSC Research
PPWSA 2022 Review: Bottom line declines despite solid growth of water sales
Commercial and industrial subscriptions see the biggest YoY growth since 2016
- At the end of 2022, there were 451,554 connections, a rise of 4.7% from the end of 2021. Household customers make up 360,948 connections, or 79.9%, of the total subscriptions, while commercial and industrial customers make up 83,874 connections or 18.6%, and the remaining 6,732 connections are subscriptions from governmental organizations, autonomous state authorities, private water distributors, and other sources. Commercial and industrial client counts increased significantly over the previous year by 9,530 connections, or 12.8% YoY, the highest YoY growth rate since 2016. Comparatively, throughout the same period, the number of household clients increased only 3.0% YoY.
Top line decreases on declining other income, but core water sales continue solid growth
- Total revenue declined 5.6% to KHR346bn in 2022 from KHR367bn in 2021. Core water sales rose 6.1% YoY to KHR300bn, representing 87% of total revenue. Core water sales, which account for 87% of total revenue, increased 6.1% YoY to KHR300 billion, driven by a 7.7% increase in total water consumption, and a 0.25% increase in average water tariff. Water sales to commercial and industrial clients saw the biggest growth of 18.1% YoY to almost KHR152bn in 2022, as water consumption from them surged 14.2% from 74 million cubic meters to 84.8 million cubic meters. However, water sales to household clients edged down 1.3% from KHR112bn in 2021 to KHR111bn in 2022 despite consumption from households increasing 3.5% during the period, due to the average water tariff for households dropping 4.6% from KHR1,038 to KHR990 per cubic meter.
Operating profit margin declined to the lowest since the pandemic
- In 2022, EBITDA plummeted 13.2% YoY to KHR184 billion, and EBITDA margin dropped 4.6%pt YoY to 53.2%. Despite the decrease in total revenue, operating expenses (excluding depreciation & amortization) increased 4.7% to KHR161bn, driven mainly by 10.3% increase in salary, and 34.5% increase in the cost of raw materials. Meanwhile, construction service costs fell 26% due to the decline in the construction service activities.
Bottom line posted a 16% decline YoY
- Net finance income decreased from KHR8.76bn in 2021 to KHR5.63bn in 2022. The net foreign exchange gain on borrowings came to KHR4.59 billion, down from KHR8.09bn in 2021, leading to the decrease in the net finance income. Consequently, pre-tax earnings fell 21.3% YoY to KHR130bn in 2022, while net profit plummeted 16.3% to KHR108 billion with net margin decreasing by 4.0%pt YoY to 31.3%.
Water subscription
| Client | 2022 | 2021 | Change | %Change | 2022 %total |
|---|---|---|---|---|---|
| Household clients | 360,948 | 350,463 | 10,485 | 3.0% | 79.9% |
| Commercial & industrial clients | 83,874 | 74,344 | 9,530 | 12.8% | 18.6% |
| Others | 6,716 | 6,578 | 138 | 2.1% | 1.5% |
| Total | 451,538 | 431,385 | 20,153 | 4.7% | 100.0% |
Revenue breakdown
| KHR'mn | 2022 | 2021 | Change | %Change | 2022 % total |
|---|---|---|---|---|---|
| Water Sales | 299,724 | 282,370 | 17,354 | 6.1% | 86.6% |
| Construction Services | 24,976 | 26,242 | -1,266 | -4.8% | 7.2% |
| Other Incomes | 21,478 | 58,259 | -36,781 | -63.1% | 6.2% |
| Total revenue | 346,178 | 366,871 | -20,693 | -5.6% | 100% |
Operating expense breakdown
| KHR'mn | 2022 | 2021 | Change | %Change | 2022 % total |
|---|---|---|---|---|---|
| Depreciation & Amortization | 59,455 | 55,194 | 4,261 | 8% | 27% |
| Electricity | 35,219 | 35,792 | -573 | -2% | 16% |
| Salaries | 70,175 | 63,631 | 6,544 | 10% | 32% |
| Raw materials for water treatment | 12,141 | 9,542 | 2,599 | 27% | 5% |
| Raw materials for household water connections | 4,953 | 3,164 | 1,790 | 57% | 2% |
| Repair & maintenance | 8,009 | 7,051 | 959 | 14% | 4% |
| Construction service expenses | 16,618 | 22,448 | -5,830 | -26% | 8% |
| Other operating expenses | 11,243 | 15,227 | -3,983 | -26% | 5% |
| Net gain/loss from forex | 3,481 | -2,274 | 5,755 | -253% | 2% |
| Total operating expense | 221,295 | 209,775 | 11,520 | 5% | 100% |
Financial Ratios
| FY end to Dec | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Per share ratios | |||||
| EPS (KHR) | 880 | 383 | 1,016 | 1,486 | 1,244 |
| EPS (KHR, adj.) | 808 | 390 | 1,096 | 1,412 | 1,202 |
| BPS (KHR) | 10,176 | 10,351 | 11,141 | 13,270 | 14,489 |
| BPS (KHR, exc Class A) | 5,679 | 5,855 | 6,644 | 8,773 | 9,992 |
| EBITDA/shr (KHR) | 1,586 | 1,169 | 2,069 | 2,441 | 2,119 |
| SPS (KHR) | 3,048 | 2,472 | 3,730 | 4,218 | 3,980 |
| DPS (KHR) | 218 | 230 | 262 | 310 | n/a |
| Valuation ratios | |||||
| Share Price | 4,200 | 6,000 | 6,100 | 7,160 | 7,560 |
| P/E (x) | 4.77 | 15.67 | 6.00 | 4.82 | 6.08 |
| P/E* (x, adj. earnings) | 5.20 | 15.38 | 5.57 | 5.07 | 6.29 |
| P/B (x) | 0.41 | 0.58 | 0.55 | 0.54 | 0.52 |
| P/B (x, exc. Class A) | 0.74 | 1.02 | 0.92 | 0.82 | 0.76 |
| EV/EBITDA (x) | 4.68 | 7.73 | 5.34 | 6.02 | 8.03 |
| P/S (x) | 1.38 | 2.43 | 1.64 | 1.70 | 1.90 |
| Dividend yields (%) | 5.18 | 3.83 | 4.30 | 4 | n/a |
| Dividend payout (%) | 25.71 | 60.09 | 25.79 | 20.86 | n/a |
| Profitability ratios | |||||
| Gross margin (%) | 75.91 | 74.21 | 76.33 | 78.74 | 77.77 |
| EBITDA margin (%) | 52.03 | 47.28 | 55.49 | 57.87 | 53.25 |
| EBIT margin (%) | 35.79 | 24.17 | 39.95 | 42.82 | 36.07 |
| Net margin (%) | 28.86 | 15.48 | 27.24 | 35.24 | 31.25 |
| ROE (%) | 8.80 | 3.67 | 9.32 | 12.03 | 8.87 |
| ROE(%, exc Class A) | 16.00 | 6.46 | 15.87 | 18.92 | 13.06 |
| ROA (%) | 5.44 | 2.18 | 5.09 | 6.20 | 4.34 |
| Efficiency ratios | |||||
| Asset turnover (x) | 0.19 | 0.14 | 0.19 | 0.18 | 0.14 |
| Receivables turnover (x) | 8.38 | 13.43 | 16.55 | 14.52 | 13.03 |
| Payable turnover (x) | 0.96 | 0.40 | 0.43 | 0.52 | 0.52 |
| Financial strength | |||||
| Debt/equity (%) | 61.16 | 75.59 | 89.87 | 97.73 | 110.98 |
| Net debt/equity (%) | 31.22 | 28.89 | 43.78 | 56.20 | 64.67 |
| Interest coverage (x) | 5.86 | 4.52 | 7.87 | 32.76 | 10.32 |
| Inter & ST debt cover (x) | 1.63 | 1.16 | 2.74 | 5.63 | 3.51 |
| Current ratio (x) | 1.58 | 0.90 | 1.27 | 2.09 | 2.32 |
| Quick ratio (x) | 0.47 | 0.36 | 0.66 | 0.96 | 1.07 |
| Net debt/EBITDA (x) | 2.04 | 2.60 | 2.39 | 3.09 | 4.46 |
Note: *Based on earnings adjusted for forex gain/loss on borrowings; **Excluding Class A (non-voting) shares
Apr 3, 2023
| Closing price | KHR 7,780 |
| IPO price | KHR 6,300 |
Stock info
| Industry | Utility (Water) |
| Market cap (KHRbn) | 658 |
| Outstanding shares (mn) | 87 |
| Majority shareholder | |
| Ministry of Economy & Fin (%) | 85 |
| Avg daily vol. (last 6 months, shr) | 3,345 |
| Free floating shares (last 6 months, %) | 11.12 |
| Price low/high (last 6 months, KHR) | 7,280 ~ 8,060 |
| EPS (KHR) (ttm) | 1244 |
| P/E (x) (ttm) | 6.08 |
| P/E (x) (ttm, adj. earnings) | 6.29 |
| P/B (x) (mrq) | 0.52 |
| P/B* (x) (mrq) | 0.76 |
| EV/EBITDA (x) (ttm) | 8.03 |
| D/E (%) (mrq) | 111.00 |
Note: ttm = trailing twelve months (2Q19~1Q23); mrq = most recent quarter (1Q23); *Excluding equity of Class C (non-voting) shares.
Stock Performance
Trading volume & value in last 12 months
| Month-Year | Monthly trading | Average per day | ||
|---|---|---|---|---|
| Volume (shr) | Value (KHR'mn) | Volume (shr) | Value (KHR'mn) | |
| Mar-23 | 122,536 | 949 | 1,857 | 14.4 |
| Feb-23 | 75,678 | 601 | 1,892 | 15.0 |
| Jan-23 | 96,464 | 745 | 4,385 | 33.9 |
| Dec-22 | 48,220 | 360 | 183 | 1.4 |
| Nov-22 | 22,701 | 168 | 109 | 0.8 |
| Oct-22 | 47,369 | 346 | 226 | 1.6 |
| Sep-22 | 128,244 | 880 | 679 | 4.7 |
| Aug-22 | 21,595 | 160 | 117 | 0.9 |
| Jul-22 | 27,857 | 207 | 190 | 1.4 |
| Jun-22 | 55,966 | 416 | 444 | 3.3 |
| May-22 | 210,816 | 1,619 | 2,008 | 15.4 |
| Apr-22 | 80,346 | 604 | 1,057 | 7.9 |
Source: CSX, YSC Research
Earning strength: EPS (TTM, KHR)
Average water tariff (KHR)
Water demand (million m3)
Annual revenue & net profit (KHR'bn)
Annual profit margin (%)
Annual profit growth (%)
Condensed Financial Statements
Statement of comprehensive income
| FY to Dec (KHR'mn) | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Revenues | 265.1 | 215.0 | 324.4 | 366.9 | 346.2 |
| COGS | -63.9 | -55.5 | -76.8 | -78.0 | -76.9 |
| Gross profit | 201.2 | 159.6 | 247.6 | 288.9 | 269.2 |
| Operating expenses | -62.3 | -59.4 | -64.3 | -78.9 | -81.4 |
| Net gain/loss from forex | -0.9 | 1.5 | -3.3 | 2.3 | -3.5 |
| EBITDA | 137.9 | 101.7 | 180.0 | 212.3 | 184.3 |
| Depreciation & Amortization | -43.1 | -49.7 | -50.4 | -55.2 | -59.5 |
| EBIT | 94.9 | 52.0 | 129.6 | 157.1 | 124.9 |
| Interest income | 16.8 | 8.8 | 7.6 | 13.6 | 17.7 |
| Interest expense | -16.2 | -11.5 | -16.5 | -4.8 | -12.1 |
| PBT | 95.5 | 49.3 | 120.7 | 165.9 | 130.5 |
| Income tax expense | -19.0 | -16.0 | -32.4 | -36.6 | -22.3 |
| Profit of the period | 76.5 | 33.3 | 88.4 | 129.3 | 108.2 |
| Actuarial loss on retirement benefit | -2.9 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net income | 73.6 | 33.3 | 88.4 | 129.3 | 108.2 |
Statement of financial position
| FY to Dec (KHR'mn) | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Non-current assets | 1,230.0 | 1,387.4 | 1,586.7 | 1,906.4 | 2,215.1 |
| Property, Plant & Equipment | 1,215.7 | 1,374.0 | 1,573.6 | 1,893.9 | 2,203.0 |
| Intangible assets | 14.3 | 13.4 | 13.1 | 12.5 | 12.1 |
| Other-non current assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Current assets | 219.4 | 216.9 | 277.9 | 400.4 | 469.0 |
| Inventories | 97.0 | 103.8 | 78.6 | 143.7 | 152.7 |
| Trade & other receivables | 18.5 | 13.6 | 25.6 | 24.9 | 28.3 |
| Cash & cash equivalent | 13.4 | 55.2 | 99.7 | 89.7 | 61.2 |
| Short-term investment | 33.6 | 17.9 | 18.4 | 68.2 | 126.1 |
| Other current assets | 56.9 | 26.5 | 55.5 | 74.0 | 100.7 |
| Total assets | 1,449.4 | 1,604.3 | 1,864.6 | 2,306.8 | 2,684.1 |
| Non-current liabilities | 411.2 | 449.8 | 663.8 | 948.9 | 1,209.6 |
| Long-term debts | 285.6 | 303.9 | 517.3 | 790.4 | 986.5 |
| Trade & other payables | 56.8 | 65.4 | 65.2 | 69.4 | 76.8 |
| Other non-current liabilities | 68.7 | 80.5 | 81.3 | 89.1 | 146.3 |
| Current liabiliites | 138.9 | 240.8 | 218.8 | 191.3 | 202.4 |
| Short-term debts | 42.1 | 33.1 | 30.8 | 23.1 | 23.5 |
| Trade & other payables | 82.3 | 196.7 | 156.6 | 142.0 | 154.7 |
| Other current liabilities | 14.5 | 11.0 | 31.3 | 26.2 | 24.2 |
| Total liabilities | 550.1 | 690.6 | 882.6 | 1,140.2 | 1,411.9 |
| Shareholders' equity | 899.3 | 913.7 | 982.1 | 1,166.6 | 1,272.2 |
| Share capital | 541.2 | 541.2 | 541.2 | 619.3 | 620.8 |
| Capital reserves | 284.5 | 339.2 | 352.5 | 418.0 | 543.3 |
| Retained earnings | 73.6 | 33.3 | 88.4 | 129.3 | 108.2 |
| Total liabilities & equity | 1,449.4 | 1,604.3 | 1,864.6 | 2,306.8 | 2,684.1 |
| Net debt | 314.4 | 281.9 | 448.4 | 723.8 | 948.8 |
| Total debt | 327.8 | 337.1 | 548.1 | 813.5 | 1,010.0 |
Statement of cash flows
| FY to Dec (KHR'mn) | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Operating cash flow | 83.1 | 224.7 | 68.8 | 69.3 | 72.2 |
| Net profit | 76.5 | 33.3 | 88.4 | 129.3 | 108.2 |
| Depreciation & amortization | 43.1 | 49.7 | 50.4 | 55.2 | 59.5 |
| Chg in working capital | 26.7 | 99.6 | -75.8 | -61.5 | -75.6 |
| Others | -63.2 | 42.1 | 5.9 | -53.7 | -19.8 |
| Investing cash flow | -98.8 | -186.0 | -199.3 | -342.9 | -288.1 |
| Net CAPEX | -161.8 | -200.1 | -195.9 | -289.7 | -281.6 |
| ST investment | 63.1 | 15.7 | -0.5 | -49.7 | -58.0 |
| Others | -0.1 | -1.6 | -2.9 | -3.4 | 51.5 |
| Financing cash flow | 13.1 | 3.1 | 175.1 | 263.5 | 187.4 |
| Net chg in share capital | 0.0 | 0.0 | 0.0 | 78.1 | 1.4 |
| Net chg in debt | 27.6 | 10.7 | 202.2 | 274.6 | 197.5 |
| Cash dividend | -6.5 | -2.8 | -26.0 | -3.4 | -4.0 |
| Others | -8.0 | -4.7 | -1.2 | -85.7 | -7.5 |
| Net change in cash & equivalent | -2.6 | 41.9 | 44.5 | -10.1 | -28.5 |
| Beginning cash & equivalent | 16.0 | 13.4 | 55.2 | 99.7 | 89.7 |
| Ending cash & equivalent | 13.4 | 55.2 | 99.7 | 89.7 | 61.2 |
Source: PPWSA, YSC Research
