East Water bullish on revenue as demand surges

       Eastern Water Resources Development and Management Plc (EASTW) expects better performance this half from demand increases as production capacity show signs of improvement.
       "Revenue improved 12% in the first half from higher water prices but this half could see even more improvement as raw water demand has jumped, especially in Rayong, our largest selling area," said chief executive Praphant Asava-aree.
       East Water derives 63% of its revenue from raw water, 22% from tap water and the rest from services and drinking water.
       It forecasts a yearly 8% drop in untreated water consumption this year from shrinking industrial production but the price increase helped offset and improve its yearly revenue by 12-15%.
       Raw water demand is expected to drop 4% this year to 215 million cubic metres, while a 10% increase is expected next year to 233 million cubic metres as domestic consumption increases and petrochemical projects expand.
       Net profit should also grow more than 15% from higher prices and lower cost.
       Average water prices climbed 15% from last year to 9.10 baht per cubic metre. This average should remain stable until next year, according to a study to be issued early next year.
       In the second quarter, East Water earned a net profit of 222 million baht, up 21% year-on-year and 4% from 214 million in the first quarter, as revenue rose 10% year-on-year to 729 million.
       First-half net profit was 436 million baht (0.26 baht a share), up 15.61% from 377 million (0.23 baht a share) from a year earlier. The yearly dividend will be more than the 20 satang forecast earlier.
       "We decided on 10 satang per share in the first half to be conservative, but since the economic situation seems to have improved, we should increase our return to shareholders too," he said.
       Further cost cutting such as renting out building space is planned, while a five-year investment of 3.6 billion baht should improve its capacity to accommodate demand in the next 10 years.
       For its raw water business, East Water is in the process of extending pipelines in Nong Plalai, Map Ta Phut and two other areas, while building its own reservoirs is being studied.
       It also plans to extend coverage in areas of existing contracts and is studying the waste water management business.
       The company also plans to install a mini-hydro turbine generator at its Prasae reservoir to generate extra revenue.
       "We also hope to win a water-loss reduction project in Bangalore, India, and bidding results should be known by October. In addition, we should receive 900 million baht from the Irrigation Department for a pipeline between the Prasae and Khlong Yai reservoirs that we took charge of on behalf of the government. A disbursement this year would support our cashflow," he said.
       Shares of EASTW closed yesterday at 3.82 baht, down four satang, in trade worth 4.59 million baht.