TTW

TTW Plc

 

- Water shortage in Pathum Thani, but no problem for TTW 

According to PostToday, the Provincial Waterworks Authority (PWA) office in Thanyaburi, Pathum Thani were unable to supply water between Klong 5 to Klong 15 and in Thanyaburi, Nong Sua, and Lam Luk Ka after the drought dried up Klong 13. The aforementioned areas have generally been affected by water shortage because demand has been high due to community expansion and they were not under PTW's (TTW's subsidiary) coverage; PTW provide water only in Rangsit – Pathum Thani (selling water to the PWA office in Pathum Thani but not in Thanyaburi). PTW uses water from Chaophraya River, which is currently sufficient for water production. PTW's June water sales were 377,000 cubic meter/day, rising 1%yoy (97% utilization rate). 

 

- Drought affects TTW’s water quality 

An impact of the current drought crisis can not be immediately assessed. However, based on historical droughts, there was usually a problem of seawater intrusion during high tide, which resulted in high salinity of river’s water in some periods, especially in PTW’s operating areas, and caused tap water’s salinity level to increase above a standard of 0.25 g/liter but remain under a maximum permitted level of 0.60 g/liter. In a worst case scenario that the salinity exceeds the permitted level, the company will have to negotiate with the government to seek solution. Water levels in front of most plants are still safe when compared with the monitoring level of 2.5 meters: around 2.66-3.86 meters for PTW (Samkok District) and 4 meters for TTW, which is 67% of the company’s profit (Banglen District, Nakhon Pathom Province, drawing water from Tachin River); the water quality is normal. 

 

In addition, a water shortage situation in Pathumthani is an opportunity of PTW to sell tap water to Pathumthani Provincial Waterworks Authority (PWA) although the plant has already produced water at almost full capacity (PWA has increased its water purchase as a special case since the scarcity started in June, but the company has not yet revealed the certain purchase volume), which would help compensate for a 1.6%yoy decrease in the company’s overall water sales in 1H15 (-0.6%yoy for TTW, -2.7%yoy for PTW, and -1.8%yoy for BIE, versus the forecasts of +3.8%yoy, -2%yoy, and -0.8%yoy, respectively. Therefore, we maintain our forecast. 

 

- Stable economy. High dividend 

Although TTW's profit is likely to stay flat, its income and cash flow are stable amidst the economic slowdown. Dividend yield is as high as 5.8% in this year, and 1H15 dividend will be paid at B0.32/share (2.8% dividend yield) in August. We reiterate BUY.