Thai Tap water Supply

Thai Tap water Supply Plc (TTW)

- High water sales volume and BOI tax exemption to boost 1Q14 normalized profit
TTW's 1Q14 net profit is projected at B700m, leaping 98%qoq
but falling 20%yoy, thanks to B325 extraordinary income from
the reversal of tax expense. Excluding extraordinary items,
1Q14 normalized profit is expected to grow by 14%qoq and
27%yoy owing to the following factors: 1) TTW would benefit
from post-flood BOI tax exemption (starting from 3Q13), thus
reducing tax expense to B40m in 1Q14 (versus B132m tax
expense in 1Q13). 2) Income from water sales would grow by
6%yoy. TTW's water sales volume is likely to rebound by
4.3%yoy after slowing down in 3Q13 (local food exporting
companies were threatened by livestock diseases). PTW sales
volume is projected to stay unchanged (full capacity), and
Bangpa-in plant's sales volume is expected to grow by 34%yoy.
Thus, total water sales volume would grow by 2.3%yoy. Water
tariff rate is expected to rise by 3%. Gross margin is projected
to rise from 69.5% in 1Q13 to 70.5% in 1Q14. Despite an
increase in electricity charge rate as a result of FT hike, it would
be negated by lower chemical cost.

- 2Q14 profit to prosper
2Q14 net profit is projected to grow qoq and yoy thanks to the
following factors: 1) Water sales volume is expected to increase
yoy and qoq owing to hot weather. 2) BOI tax exemption would
be booked for a full year. 3) Share of profit from associated
companies is expected to increase significantly; reversing from
B22m loss in 2Q13 (as a result of Fx loss).
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Good for investing and speculating. 6% dividend yield
This is a good entry point to invest or speculate on
TTW([email protected]). TTW's 1H14 earnings result is projected to be
strong. Its current share price is attractive, and its dividend
yield might be as high as 6.1%. We reiterate to buy.