PPWSA 1Q23 Review: Core revenue growth continues to be resilient
Equity Report / May 22, 2023
Performance Highlights
| FY ends Dec (KHR’bn) | 1Q23 | 4Q22 | 1Q22 | % QoQ | % YoY |
|---|---|---|---|---|---|
| Revenue | 83.01 | 92.27 | 82.02 | -10.0% | 1.2% |
| EBITDA | 41.99 | 42.85 | 46.91 | -2.0% | -10.5% |
| EBIT | 26.87 | 28.01 | 32.04 | -4.1% | -16.1% |
| Finance cost | 14.87 | -3.46 | 8.65 | -529.2% | 71.9% |
| PBT | 41.74 | 24.54 | 40.69 | 70.1% | 2.6% |
| Net profit | 38.41 | 22.09 | 30.29 | 73.9% | 26.8% |
| EBITDA margin | 50.6% | 46.4%pt | 57.2%pt | 4.1%pt | -6.6%pt |
| EBIT margin | 32.4% | 30.4%pt | 39.1%pt | 2.0%pt | -6.7%pt |
| Net margin | 46.3% | 23.9%pt | 36.9%pt | 22.3%pt | 9.3%pt |
Source: YSC Research
1Q23 Review: Core revenue growth continues to be resilient
Commercial & industrial clients continue to drive water demand growth
- Water subscriptions increased 4.8% YoY to 458,909 connections at the end of 1Q23. Household clients make up the vast majority of water subscribers, with 366,997 connections, or 80.0% of the total connections. Commercial and industrial clients account for 85,180 connections or 18.6% of the total, while the remaining 6,732 connections are from members of the government, autonomous state authorities, private water distributors, and other organizations. The number of commercial and industrial clients continued to experience strong growth, increasing by 7,070 connections or 9.1% YoY from the end of 1Q22. In comparison, the number of household clients increased only by 4.0% during the same period.
Top line remains stable despite solid growth in core water sales
- Total revenue went up slightly by 1.2% YoY to KHR83bn in 1Q23, but down 10.0% QoQ. Even though the average water tariff dropped 1% compared to 1Q22, core water sales continue to rise 6.7% YoY to KHR73.7bn, or 88.8% of total revenue. Water sales to commercial and industrial clients saw the biggest growth of 10.8% YoY to almost KHR35.6bn in 1Q23, as water consumption from them continues to surge. On the other hand, water sales to household clients remained almost unchanged with only a 0.4% increase from KHR26.4bn in 1Q22 to KHR26.5bn in 1Q23. Meanwhile, water sales to public institutions & autonomous state bodies, wholesalers & rental rooms dropped by 13.0% YoY as the average water tariff for them decreased 25% from KHR1,443 in 1Q22 to KHR1,080.
Rising costs of raw materials and salaries squeeze operating profit margin by 6.7%pt YoY
- In 1Q23, EBITDA came to KHR42.0bn, down 2.0% QoQ, and 10.5% YoY. Operating expenses (excluding depreciation & amortization) increased 16.9% YoY to KHR56.1bn, driven mainly by a 15.0% YoY increase in salaries, and a 21.5% YoY increase in raw materials for water treatment and household connection. This led to a squeeze in EBITDA margin by 6.%pt YoY to 50.6%. With depreciation and amortization expenses edging up 1.6% YoY, EBIT fell 16.1% YoY to KHR26.9bn. As a result, EBIT margin narrowed 6.7%pt YoY to 32.4% in 1Q23.
Net profit surges 26.8% YoY to KHR38.4bn in 1Q23 on unrealized forex gain
- Net finance income increased from KHR8.7bn in 1Q22 to KHR14.9bn in 1Q23. The net unrealized foreign exchange gain on borrowings came to KHR14.1bn, up from KHR8.6bn in 1Q22, leading to an increase in the net finance income. This was mainly the result of KHR appreciation against USD as most of PPWSA’s loans were made in the foreign currency, while its base currency for accounting record is KHR. Consequently, net profit climbed 26.8% to KHR38.4bn with net margin improving by 9.3%pt YoY to 46.3%.
Water subscription
| Client | 1Q23 | 1Q22 | Change | %Change | 1Q23 % total |
|---|---|---|---|---|---|
| Household clients | 366,997 | 353,020 | 13,977 | 4.0% | 80.0% |
| Commercial & industrial clients | 85,180 | 78,110 | 7,070 | 9.1% | 18.6% |
| Others | 6,732 | 6,653 | 79 | 1.2% | 1.5% |
| Total | 458,909 | 437,783 | 21,126 | 4.8% | 100.0% |
Revenue breakdown
| KHR'mn | 1Q23 | 1Q22 | Change | %Change | 1Q23 % total |
|---|---|---|---|---|---|
| Water Sales | 73,743 | 69,132 | 4,610 | 6.7% | 88.8% |
| Construction Services | 6,825 | 3,817 | 3,009 | 78.8% | 8.2% |
| Other Incomes | 2,444 | 9,071 | -6,627 | -73.1% | 2.9% |
| Total revenue | 83,012 | 82,020 | 992 | 1.2% | 100% |
Operating expense breakdown
| KHR'mn | 1Q23 | 1Q22 | Change | %Change | 1Q23 % total |
|---|---|---|---|---|---|
| Depreciation & Amortization | 15,118 | 14,879 | 239 | 2% | 27% |
| Electricity | 8,953 | 8,524 | 430 | 5% | 16% |
| Salaries | 18,457 | 16,054 | 2,403 | 15% | 33% |
| Raw materials for water treatment | 3,381 | 2,580 | 801 | 31% | 6% |
| Raw materials for household water connections | 1,157 | 1,154 | 3 | 0% | 2% |
| Repair & maintenance | 2,294 | 1,359 | 934 | 69% | 4% |
| Construction service expenses | 3,205 | 1,991 | 1,214 | 61% | 6% |
| Other operating expenses | 2,685 | 2,316 | 369 | 16% | 5% |
| Net gain/loss from forex | 891 | 1,127 | -236 | -21% | 2% |
| Total operating expense | 56,141 | 49,984 | 6,157 | 12% | 100% |
Financial Ratios
| FY end to Dec | 2019 | 2020 | 2021 | 2022 | 1Q23 (ttm) |
|---|---|---|---|---|---|
| Per share ratios | |||||
| EPS (KHR) | 383 | 1,016 | 1,486 | 1,244 | 1,337 |
| EPS (KHR, adj.) | 390 | 1,096 | 1,412 | 1,202 | 1,381 |
| BPS (KHR) | 10,351 | 11,141 | 13,270 | 14,489 | 14,885 |
| BPS (KHR, exc Class A) | 5,855 | 6,644 | 8,773 | 9,992 | 10,388 |
| EBITDA/shr (KHR) | 1,169 | 2,069 | 2,441 | 2,119 | 2,063 |
| SPS (KHR) | 2,472 | 3,730 | 4,218 | 3,980 | 3,992 |
| DPS (KHR) | 230 | 262 | 310 | n/a | n/a |
| Valuation ratios | |||||
| Share Price | 6,000 | 6,100 | 7,160 | 7,560 | 7,560 |
| P/E (x) | 15.67 | 6.00 | 4.82 | 6.08 | 5.65 |
| P/E* (x, adj. earnings) | 15.38 | 5.57 | 5.07 | 6.29 | 5.47 |
| P/B (x) | 0.58 | 0.55 | 0.54 | 0.52 | 0.51 |
| P/B (x, exc. Class A) | 1.02 | 0.92 | 0.82 | 0.76 | 0.73 |
| EV/EBITDA (x) | 7.73 | 5.34 | 6.02 | 8.03 | 8.41 |
| P/S (x) | 2.43 | 1.64 | 1.70 | 1.90 | 1.89 |
| Dividend yields (%) | 3.83 | 4.30 | 4.33 | n/a | n/a |
| Dividend payout (%) | 60.09 | 25.79 | 20.86 | n/a | n/a |
| Profitability ratios | |||||
| Gross margin (%) | 74.21 | 76.33 | 78.74 | 77.77 | 76.86 |
| EBITDA margin (%) | 47.28 | 55.49 | 57.87 | 53.25 | 51.68 |
| EBIT margin (%) | 24.17 | 39.95 | 42.82 | 36.07 | 34.48 |
| Net margin (%) | 15.48 | 27.24 | 35.24 | 31.25 | 33.50 |
| ROE (%) | 3.67 | 9.32 | 12.03 | 8.87 | 9.02 |
| ROE(%, exc Class A) | 6.46 | 15.87 | 18.92 | 13.06 | 12.95 |
| ROA (%) | 2.18 | 5.09 | 6.20 | 4.34 | 4.28 |
| Efficiency ratios | |||||
| Asset turnover (x) | 0.14 | 0.19 | 0.18 | 0.14 | 0.13 |
| Receivables turnover (x) | 13.43 | 16.55 | 14.52 | 13.03 | 3.85 |
| Payable turnover (x) | 0.40 | 0.43 | 0.52 | 0.52 | 0.37 |
| Financial strength | |||||
| Debt/equity (%) | 75.59 | 89.87 | 97.73 | 110.98 | 110.82 |
| Net debt/equity (%) | 28.89 | 43.78 | 56.20 | 64.67 | 65.21 |
| Interest coverage (x) | 4.52 | 7.87 | 32.76 | 10.32 | 4.91 |
| Inter & ST debt cover (x) | 1.16 | 2.74 | 5.63 | 3.51 | 2.52 |
| Current ratio (x) | 0.90 | 1.27 | 2.09 | 2.32 | 1.98 |
| Quick ratio (x) | 0.36 | 0.66 | 0.96 | 1.07 | 0.95 |
| Net debt/EBITDA (x) | 2.60 | 2.39 | 3.09 | 4.46 | 4.75 |
Note: *Based on earnings adjusted for forex gain/loss on borrowings; **Excluding Class A (non-voting) shares
May 17, 2023
| Closing price | KHR 7,700 |
| IPO price | KHR 6,300 |
Stock info
| Industry | Utility (Water) |
| Market cap (KHRbn) | 670 |
| Outstanding shares (mn) | 21 |
| Majority shareholder | |
| Ministry of Economy & Fin (%) | 80 |
| Avg daily vol. (last 6 months, shr) | 3428.11 |
| Free floating shares (last 6 months, %) | 11.12 |
| Price low/high (last 6 months, KHR) | 7,300 ~ 8,060 |
| EPS (KHR) (ttm) | 1337 |
| P/E (x) (ttm) | 5.79 |
| P/E (x) (ttm, adj. earnings) | 5.60 |
| P/B (x) (mrq) | 0.52 |
| P/B* (x) (mrq) | 0.75 |
| EV/EBITDA (x) (ttm) | 3.75 |
| D/E (%) (mrq) | 110.82 |
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) | |
| Apr-23 | 41,968 | 326 | 552 | 4.3 |
| 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 |
Source: CSX, YSC Research
Earning strength: EPS (TTM, KHR)
Average water tariff (KHR)
Water demand (million m3)
Quarterly revenue & net profit (KHR'bn)
Quarterly profit margin (%)
Quarterly profit growth (%)
Condensed Financial Statements
Statement of comprehensive income
| FY to Dec (KHR'mn) | 2019 | 2020 | 2021 | 2022 | 1Q23 |
|---|---|---|---|---|---|
| Revenues | 215.0 | 324.4 | 366.9 | 346.2 | 83.0 |
| COGS | -55.5 | -76.8 | -78.0 | -76.9 | -19.0 |
| Gross profit | 159.6 | 247.6 | 288.9 | 269.2 | 64.0 |
| Operating expenses | -59.4 | -64.3 | -78.9 | -81.4 | -21.1 |
| Net gain/loss from forex | 1.5 | -3.3 | 2.3 | -3.5 | -0.9 |
| EBITDA | 101.7 | 180.0 | 212.3 | 184.3 | 42.0 |
| Depreciation & Amortization | -49.7 | -50.4 | -55.2 | -59.5 | -15.1 |
| EBIT | 52.0 | 129.6 | 157.1 | 124.9 | 26.9 |
| Interest income | 8.8 | 7.6 | 13.6 | 17.7 | 16.0 |
| Interest expense | -11.5 | -16.5 | -4.8 | -12.1 | -1.2 |
| PBT | 49.3 | 120.7 | 165.9 | 130.5 | 41.7 |
| Income tax expense | -16.0 | -32.4 | -36.6 | -22.3 | -3.3 |
| Profit of the period | 33.3 | 88.4 | 129.3 | 108.2 | 38.4 |
| Actuarial loss on retirement benefit | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net income | 33.3 | 88.4 | 129.3 | 108.2 | 38.4 |
Statement of financial position
| FY to Dec (KHR'mn) | 2019 | 2020 | 2021 | 2022 | 1Q23 |
|---|---|---|---|---|---|
| Non-current assets | 1,387.4 | 1,586.7 | 1,906.4 | 2,215.1 | 2,305.5 |
| Property, Plant & Equipment | 1,374.0 | 1,573.6 | 1,893.9 | 2,203.0 | 2,293.7 |
| Intangible assets | 13.4 | 13.1 | 12.5 | 12.1 | 11.8 |
| Other-non current assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Current assets | 216.9 | 277.9 | 400.4 | 469.0 | 448.5 |
| Inventories | 103.8 | 78.6 | 143.7 | 152.7 | 131.3 |
| Trade & other receivables | 13.6 | 25.6 | 24.9 | 28.3 | 48.4 |
| Cash & cash equivalent | 55.2 | 99.7 | 89.7 | 61.2 | 42.3 |
| Short-term investment | 17.9 | 18.4 | 68.2 | 126.1 | 125.4 |
| Other current assets | 26.5 | 55.5 | 74.0 | 100.7 | 101.2 |
| Total assets | 1,604.3 | 1,864.6 | 2,306.8 | 2,684.1 | 2,754.0 |
| Non-current liabilities | 449.8 | 663.8 | 948.9 | 1,209.6 | 1,220.8 |
| Long-term debts | 303.9 | 517.3 | 790.4 | 986.5 | 996.3 |
| Trade & other payables | 65.4 | 65.2 | 69.4 | 76.8 | 78.8 |
| Other non-current liabilities | 80.5 | 81.3 | 89.1 | 146.3 | 145.8 |
| Current liabiliites | 240.8 | 218.8 | 191.3 | 202.4 | 226.9 |
| Short-term debts | 33.1 | 30.8 | 23.1 | 23.5 | 23.2 |
| Trade & other payables | 196.7 | 156.6 | 142.0 | 154.7 | 193.4 |
| Other current liabilities | 11.0 | 31.3 | 26.2 | 24.2 | 10.3 |
| Total liabilities | 690.6 | 882.6 | 1,140.2 | 1,411.9 | 1,447.7 |
| Shareholders' equity | 913.7 | 982.1 | 1,166.6 | 1,272.2 | 1,306.3 |
| Share capital | 541.2 | 541.2 | 619.3 | 620.8 | 620.8 |
| Capital reserves | 339.2 | 352.5 | 418.0 | 543.3 | 647.1 |
| Retained earnings | 33.3 | 88.4 | 129.3 | 108.2 | 38.4 |
| Total liabilities & equity | 1,604.3 | 1,864.6 | 2,306.8 | 2,684.1 | 2,754.0 |
| Net debt | 281.9 | 448.4 | 723.8 | 948.8 | 977.2 |
| Total debt | 337.1 | 548.1 | 813.5 | 1,010.0 | 1,019.4 |
Statement of cash flows
| FY to Dec (KHR'mn) | 2019 | 2020 | 2021 | 2022 | 1Q23 |
|---|---|---|---|---|---|
| Operating cash flow | 224.7 | 68.8 | 69.3 | 72.2 | 61.7 |
| Net profit | 33.3 | 88.4 | 129.3 | 108.2 | 41.7 |
| Depreciation & amortization | 49.7 | 50.4 | 55.2 | 59.5 | 15.1 |
| Chg in working capital | 99.6 | -75.8 | -61.5 | -75.6 | 36.4 |
| Others | 42.1 | 5.9 | -53.7 | -19.8 | -31.6 |
| Investing cash flow | -186.0 | -199.3 | -342.9 | -288.1 | -101.6 |
| Net CAPEX | -200.1 | -195.9 | -289.7 | -281.6 | -101.0 |
| ST investment | 15.7 | -0.5 | -49.7 | -58.0 | 0.7 |
| Others | -1.6 | -2.9 | -3.4 | 51.5 | -1.3 |
| Financing cash flow | 3.1 | 175.1 | 263.5 | 187.4 | 21.1 |
| Net chg in share capital | 0.0 | 0.0 | 78.1 | 1.4 | 0.0 |
| Net chg in debt | 10.7 | 202.2 | 274.6 | 197.5 | 22.6 |
| Cash dividend | -2.8 | -26.0 | -3.4 | -4.0 | 0.0 |
| Others | -4.7 | -1.2 | -85.7 | -7.5 | -1.5 |
| Net change in cash & equivalent | 41.9 | 44.5 | -10.1 | -28.5 | -18.9 |
| Beginning cash & equivalent | 13.4 | 55.2 | 99.7 | 89.7 | 61.2 |
| Ending cash & equivalent | 55.2 | 99.7 | 89.7 | 61.2 | 42.3 |
Source: PPWSA, YSC Research
