PPWSA 4Q23 Review: Strong Recovery and Resilience in Challenging Times
Equity Report / March 26, 2024
Performance Highlights
| FY ends Dec (KHR bn) | 4Q23 | % QoQ | % YoY | 2023 | % YoY |
|---|---|---|---|---|---|
| Revenue | 100.92 | -3.4% | 9.4% | 387.94 | 12.1% |
| EBITDA | 54.75 | -13.6% | 27.8% | 214.47 | 13.5% |
| EBIT | 39.22 | -17.8% | 40.0% | 152.49 | 17.8% |
| Finance cost | 0.89 | 38.8% | n/a | 0.98 | -6.4% |
| PBT | 40.11 | -17.1% | 63.4% | 153.47 | 17.6% |
| Net profit | 35.19 | -11.5% | 59.3% | 126.61 | 17.0% |
| EBITDA margin | 54.2% | -6.4%pt | 7.8%pt | 55.3% | 0.7%pt |
| EBIT margin | 38.9% | -6.8%pt | 8.5%pt | 39.3% | 1.9%pt |
| Net margin | 34.9% | -3.2%pt | 10.9%pt | 32.6% | 1.4%pt |
Source: YSC Research
PPWSA 4Q23 Review: Strong Recovery and Resilience in Challenging Times
Number of household connections posts largest YoY growth since 2019
- In 4Q23, total water subscription reached 478,141 connections, an increase of 2.4% compared to the previous quarter, and 5.9% compared to the same period last year. Of the total subscriptions, household clients account for 381,752 connections, or 79.8%, while commercial and industrial clients account for 89,702 connections or 18.8%, with the remaining 1.4%, connections being subscriptions from government institutions, autonomous state authorities, private water distributors, and others. Compared to the previous year, the number of household clients increased by 20,804 connections or 5.8%, the largest YoY growth rate since 2019. Meanwhile, the growth momentum of commercial and industrial clients is slowing down to 6.9% YoY, it had the highest growth rate of 16.4% in 3Q22.
Top line increases despite declining construction services via strong water sales
- The total revenue generated in 4Q23 increased 9.4% compared to 4Q22, amounting to KHR100.92 bn. Water sales, which represent 86.8% of the total revenue, continued their robust growth of 10.1% YoY despite modest growth in water subscription. On the other hand, income from construction service came to KHR2.7 bn in 4Q23, down from KH11.48 bn in 4Q22, representing a 76.4% decrease. Meanwhile, other incomes, which include service fees from replacement of water meter and other spare parts, skyrocketed eight-fold to KHR10.59 bn in 4Q23, up from just KHR1.18 bn in 4Q22.
- In 2023, revenue totaled to KHR387.94 bn, posting a robust increase of 12.1% compared to a year earlier. Despite moderate growth of 5.9% of additional subscriptions and strong demand amongst household clients, water sales increased by an impressive 16.7% YoY to KHR349.64 bn. On the other hand, income from construction services decreased by 33.3% from KHR24.98 bn in 2022 to KHR16.67 bn. Meanwhile, other income reached KHR21.64 bn, a 0.7% growth from the previous year. The core revenue from water sales was driven by strong water consumption demand, while the average water tariff remained almost unchanged.
EBITDA margin improve by 7.8%pt YoY in 4Q23
- In 4Q23, EBITDA came to KHR54.75 bn, up 27.8% YoY, but down 13.6% QoQ. Total operating expense in 4Q23 decreased by 9.8% YoY due to a 70.7% YoY decrease in construction service expense and a 163.1% YoY decrease in net forex gains/loss despite increases in expenses in every other category. As a result, EBITDA margin improved by 7.8pt% YoY to 54.2% in 4Q23.
- In 2023, PPWSA earned KHR212.2 bn (+12.3% YoY) in EBITDA and KHR150.3 bn (+16.1% YoY) in EBIT. Total operating expenses increased by 9.7% YoY, driven by increases in electricity (+20.1% YoY), salaries (+14.4% YoY), raw materials for water treatment (+30.8% YoY), and repair & maintenance (+45.5% YoY). As a result, the EBITDA margin and EBIT margin slightly improved by 0.1%pt YoY and 1.3%pt YoY, respectively.
Net profit recovers strongly in 4Q23
- In 4Q23, net income surged from KHR22.1 in 4Q22 to KHR35.2 bn, a significant 59.3% increase YoY, as net interest income increased by 35.2% YoY and lead to better net margin (+10.9%pt YoY).
- Net income increased from KHR108.2 bn in 2022 to KHR126.6 bn in 2023, almost reaching all-time high from 2021, representing a 17.0% increase YoY, due to strong revenue growth and improved operating margin. Net margin came to 32.6%, up 1.4%pt YoY
- The EPS increased 17% YoY from KHR1,244 in 2022 to KHR1,456 in 2023, at which PPWSA’s stock is trading at a P/E of 5.00x.
Water subscription
| Client | 2023 | 2022 | Change | %Change | 4Q23 % total |
|---|---|---|---|---|---|
| Household clients | 381,752 | 360,948 | 20,804 | 5.8% | 79.8% |
| Commercial & industrial clients | 89,702 | 83,874 | 5,828 | 6.9% | 18.8% |
| Others | 6,687 | 6,732 | -45 | -0.7% | 1.4% |
| Total | 478,141 | 451,554 | 26,587 | 5.9% | 100.0% |
Revenue breakdown
| KHR'mn | 2023 | 2022 | Change | %Change | 2023 % total |
|---|---|---|---|---|---|
| Water Sales | 349,640 | 299,724 | 49,917 | 16.7% | 90.1% |
| Construction Services | 16,666 | 24,976 | -8,311 | -33.3% | 4.3% |
| Other Incomes | 21,638 | 21,478 | 159 | 0.7% | 5.6% |
| Total revenue | 387,943 | 346,178 | 41,765 | 12.1% | 100% |
Operating expense breakdown
| KHR'mn | 2023 | 2022 | Change | %Change | 2023 % total |
|---|---|---|---|---|---|
| Depreciation & Amortization | 61,978 | 59,455 | 2,523 | 4% | 26% |
| Electricity | 42,291 | 35,219 | 7,073 | 20% | 18% |
| Salaries | 80,292 | 70,175 | 10,117 | 14% | 34% |
| Raw materials for water treatment | 15,875 | 12,141 | 3,735 | 31% | 7% |
| Raw materials for household water connections | 4,817 | 4,953 | -137 | -3% | 2% |
| Repair & maintenance | 11,651 | 8,009 | 3,642 | 45% | 5% |
| Construction service expenses | 9,732 | 16,618 | -6,887 | -41% | 4% |
| Other operating expenses | 15,155 | 11,243 | 3,912 | 35% | 6% |
| Net gain/loss from forex | -6,342 | -1,106 | -5,236 | 474% | -3% |
| Total operating expense | 235,450 | 216,708 | 18,742 | 9% | 100% |
Financial Ratios
| FY end to Dec | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Per share ratios | |||||
| EPS (KHR) | 383 | 1,016 | 1,486 | 1,244 | 1,456 |
| EPS (KHR, adj.) | 390 | 1,096 | 1,412 | 1,202 | 1,547 |
| BPS (KHR) | 10,351 | 11,141 | 13,270 | 14,489 | 15,914 |
| BPS (KHR, exc Class A) | 5,855 | 6,644 | 8,773 | 9,992 | 11,417 |
| EBITDA/shr (KHR) | 1,169 | 2,069 | 2,441 | 2,172 | 2,466 |
| SPS (KHR) | 2,472 | 3,730 | 4,218 | 3,980 | 4,460 |
| DPS (KHR) | 230 | 262 | 310 | 330 | 0 |
| Valuation ratios | |||||
| Share Price | 6,000 | 6,100 | 7,160 | 7,560 | 7,280 |
| P/E (x) | 15.67 | 6.00 | 4.82 | 6.08 | 5.00 |
| P/E* (x, adj. earnings) | 15.38 | 5.57 | 5.07 | 6.29 | 4.70 |
| P/B (x) | 0.58 | 0.55 | 0.54 | 0.52 | 0.46 |
| P/B (x, exc. Class A) | 1.02 | 0.92 | 0.82 | 0.76 | 0.64 |
| EV/EBITDA (x) | 7.73 | 5.34 | 6.02 | 7.86 | 8.44 |
| P/S (x) | 2.43 | 1.64 | 1.70 | 1.90 | 1.63 |
| Dividend yields (%) | 3.83 | 4.30 | 4.33 | 4 | 0 |
| Dividend payout (%) | 60.09 | 25.79 | 20.86 | 26.53 | 0 |
| Profitability ratios | |||||
| Gross margin (%) | 74.21 | 76.33 | 78.74 | 77.77 | 78.25 |
| EBITDA margin (%) | 47.28 | 55.49 | 57.87 | 54.57 | 55.28 |
| EBIT margin (%) | 24.17 | 39.95 | 42.82 | 37.40 | 39.31 |
| Net margin (%) | 15.48 | 27.24 | 35.24 | 31.25 | 32.64 |
| ROE (%) | 3.67 | 9.32 | 12.03 | 8.87 | 9.50 |
| ROE(%, exc Class A) | 6.46 | 15.87 | 18.92 | 13.06 | 13.44 |
| ROA (%) | 2.18 | 5.09 | 6.20 | 4.34 | 4.33 |
| Efficiency ratios | |||||
| Asset turnover (x) | 0.14 | 0.19 | 0.18 | 0.14 | 0.13 |
| Receivables turnover (x) | 13.43 | 16.55 | 14.52 | 12.02 | 12.78 |
| Payable turnover (x) | 0.40 | 0.43 | 0.52 | 0.52 | 0.50 |
| Financial strength | |||||
| Debt/equity (%) | 75.59 | 89.87 | 97.73 | 110.98 | 126.53 |
| Net debt/equity (%) | 28.89 | 43.78 | 56.20 | 65.02 | 84.41 |
| Interest coverage (x) | 4.52 | 7.87 | 32.76 | 35.86 | 6.76 |
| Inter & ST debt cover (x) | 1.16 | 2.74 | 5.63 | 4.78 | 3.30 |
| Current ratio (x) | 0.90 | 1.27 | 2.09 | 2.32 | 2.86 |
| Quick ratio (x) | 0.36 | 0.66 | 0.96 | 1.07 | 0.75 |
| Net debt/EBITDA (x) | 2.60 | 2.39 | 3.09 | 4.38 | 5.49 |
Note: *Based on earnings adjusted for forex gain/loss on borrowings; **Excluding Class A (non-voting) shares
March 18, 2024
| Closing price | KHR 7,260 |
| IPO price | KHR 6,300 |
Stock Info
| Industry | Utility (Water) |
| Market cap (KHRbn) | 631 |
| Outstanding shares (mn) | 21 |
| Majority shareholder | 0.00 |
| Ministry of Economy & Fin (%) | 80 |
| Avg daily vol. (last 6 months, shr) | 2,670 |
| Free floating shares (last 6 months, %) | 9.45 |
| Price low/high (last 6 months, KHR) | 7,120 ~ 7,440 |
| EPS (KHR) | 1456 |
| P/E (x, adj. earnings) | 4.88 |
| P/B (x) | 0.45 |
| P/B** (x) | 0.63 |
| EV/EBITDA (x) | 8.41 |
| D/E (%) | 126.53 |
Note: *Based on earnings adjusted for forex gain/loss
**Excluding equity of class A (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) | |
| Feb-24 | 30,854 | 224 | 735 | 5.3 |
| Jan-24 | 47,766 | 345 | 2,171 | 15.7 |
| Dec-23 | 89,953 | 651 | 357 | 2.6 |
| Nov-23 | 35,021 | 252 | 168 | 1.2 |
| Oct-23 | 60,791 | 437 | 289 | 2.1 |
| Sep-23 | 80,537 | 589 | 426 | 3.1 |
| Aug-23 | 43,719 | 327 | 238 | 1.8 |
| Jul-23 | 38,637 | 288 | 276 | 2.1 |
| Jun-23 | 76,216 | 584 | 577 | 4.4 |
| May-23 | 76,689 | 594 | 767 | 5.9 |
| Apr-23 | 41,968 | 326 | 552 | 4.3 |
| Mar-23 | 122,536 | 949 | 1,857 | 14.4 |
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) | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Revenues | 215.0 | 324.4 | 366.9 | 346.2 | 387.9 |
| COGS | -55.5 | -76.8 | -78.0 | -76.9 | -84.4 |
| Gross profit | 159.6 | 247.6 | 288.9 | 269.2 | 303.6 |
| Operating expenses | -59.4 | -64.3 | -78.9 | -81.4 | -95.4 |
| Net gain/loss from forex | 1.5 | -3.3 | 2.3 | 1.1 | 6.3 |
| EBITDA | 101.7 | 180.0 | 212.3 | 188.9 | 214.5 |
| Depreciation & Amortization | -49.7 | -50.4 | -55.2 | -59.5 | -62.0 |
| EBIT | 52.0 | 129.6 | 157.1 | 129.5 | 152.5 |
| Interest income | 8.8 | 7.6 | 13.6 | 4.7 | 23.5 |
| Interest expense | -11.5 | -16.5 | -4.8 | -3.6 | -22.6 |
| PBT | 49.3 | 120.7 | 165.9 | 130.5 | 153.5 |
| Income tax expense | -16.0 | -32.4 | -36.6 | -22.3 | -26.9 |
| Profit of the period | 33.3 | 88.4 | 129.3 | 108.2 | 126.6 |
| Other comprehensive income/(loss) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net income | 33.3 | 88.4 | 129.3 | 108.2 | 126.6 |
Statement of financial position
| FY to Dec (KHR'mn) | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Non-current assets | 1,387.4 | 1,586.7 | 1,906.4 | 2,215.1 | 2,505.4 |
| Property, Plant & Equipment | 1,374.0 | 1,573.6 | 1,893.9 | 2,203.0 | 2,495.0 |
| Intangible assets | 13.4 | 13.1 | 12.5 | 12.1 | 10.5 |
| Other-non current assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Current assets | 216.9 | 277.9 | 400.4 | 469.0 | 653.6 |
| Inventories | 103.8 | 78.6 | 143.7 | 152.7 | 318.7 |
| Trade & other receivables | 13.6 | 25.6 | 24.9 | 32.7 | 28.0 |
| Cash & cash equivalent | 55.2 | 99.7 | 89.7 | 56.7 | 16.1 |
| Short-term investment | 17.9 | 18.4 | 68.2 | 126.1 | 127.3 |
| Other current assets | 26.5 | 55.5 | 74.0 | 100.7 | 163.5 |
| Total assets | 1,604.3 | 1,864.6 | 2,306.8 | 2,684.1 | 3,159.1 |
| Non-current liabilities | 449.8 | 663.8 | 948.9 | 1,209.6 | 1,535.9 |
| Long-term debts | 303.9 | 517.3 | 790.4 | 986.5 | 1,296.9 |
| Trade & other payables | 65.4 | 65.2 | 69.4 | 76.8 | 82.9 |
| Other non-current liabilities | 80.5 | 81.3 | 89.1 | 146.3 | 156.1 |
| Current liabiliites | 240.8 | 218.8 | 191.3 | 202.4 | 228.6 |
| Short-term debts | 33.1 | 30.8 | 23.1 | 23.5 | 23.7 |
| Trade & other payables | 196.7 | 156.6 | 142.0 | 154.7 | 179.9 |
| Other current liabilities | 11.0 | 31.3 | 26.2 | 24.2 | 25.0 |
| Total liabilities | 690.6 | 882.6 | 1,140.2 | 1,411.9 | 1,764.5 |
| Shareholders' equity | 913.7 | 982.1 | 1,166.6 | 1,272.2 | 1,394.5 |
| 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 | 126.6 |
| Total liabilities & equity | 1,604.3 | 1,864.6 | 2,306.8 | 2,684.1 | 3,159.1 |
| Net debt | 281.9 | 448.4 | 723.8 | 953.3 | 1,304.5 |
| Total debt | 337.1 | 548.1 | 813.5 | 1,010.0 | 1,320.6 |
Statement of cash flows
| FY to Dec (KHR'mn) | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Operating cash flow | 224.7 | 68.8 | 69.3 | 62.2 | -82.7 |
| Net profit | 33.3 | 88.4 | 129.3 | 108.2 | 126.6 |
| Depreciation & amortization | 49.7 | 50.4 | 55.2 | 59.5 | 62.0 |
| Chg in working capital | 99.6 | -75.8 | -61.5 | -80.1 | -202.8 |
| Others | 42.1 | 5.9 | -53.7 | -25.3 | -68.4 |
| Investing cash flow | -186.0 | -199.3 | -342.9 | -337.0 | -266.0 |
| Net CAPEX | -200.1 | -195.9 | -289.7 | -281.6 | -269.9 |
| ST investment | 15.7 | -0.5 | -49.7 | -58.0 | -1.2 |
| Others | -1.6 | -2.9 | -3.4 | 2.5 | 5.1 |
| Financing cash flow | 3.1 | 175.1 | 263.5 | 187.4 | 308.0 |
| 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 | 320.5 |
| Cash dividend | -2.8 | -26.0 | -3.4 | -4.0 | -4.3 |
| Others | -4.7 | -1.2 | -85.7 | -7.5 | -8.2 |
| Net change in cash & equivalent | 41.9 | 44.5 | -10.1 | -87.4 | -40.6 |
| Beginning cash & equivalent | 13.4 | 55.2 | 99.7 | 89.7 | 56.7 |
| Ending cash & equivalent | 55.2 | 99.7 | 89.7 | 2.3 | 16.1 |
Source: The Company, YSC Research
