• We attended BWE’s annual general meeting (AGM) in Binh Duong Province on March 25, 2024. Overall, BWE’s management maintains its ambition in M&A if they have chances and plan further investments to increase water capacity in other provinces, tripling waste-to-energy capacity, and actively look for cheap funding with an expected interest rate of 7-8% (via loans & bonds).
• BWE’s management set its 2024 guidance with sales volume of 192.7 million cubic meters in 2024 (+5% YoY), parent revenue of VND4.1tn (+4% YoY), and parent NPAT of at least VND700bn (+17% YoY). We estimate consolidated NPAT of VND730bn (+9% YoY; equivalent to 100% of our forecast).
• BWE’s management expects the residential waste  treatment tariff to increase 10% in Q2 this year, slightly slower than our current forecast of April 1, 2024. Conversely, BWE’s 2M prelim NPAT is slightly ahead of our forecast and so we see insignficiant change to our 2024F NPAT forecast, pending a fuller review. 
• The water tariff increase of 5% p.a. to be approved at the end of 2024. According to Mr. Thien, Chairman of BWE, their water tariff hike proposal of 5% p.a. is expected to be approved at the end of this year, which is slightly higher than our assumption (3% increase p.a.)  and 6 months sooner than our forecast (mid-July, 2025). We are waiting for more developments to factor in the new assumptions.
• Shareholders approved the 2023 stock dividend  at a ratio of 100:14 on its current capital charter (i.e., 100 existing shares will get an additional 14 shares). This is an additional 27,008,800 shares, expected to be issued in June. After stock dividend payouts, BWE’s capital charter will be raised to VND2.2tn with 220 million shares outstanding.
• Shareholders approved the preliminary plan to pay cash dividends for FY2024 at VND1.300/share. This is slightly lower than our forecast of VND1.400/share (93% of our forecast). We attribute this to the management’s caution as it still needs capital to expand water distribution networks.
• We currently have an  OUTPERFORM rating for BWE with a target price of VND48,400/share.

BWE’s 2M prelim results are slightly ahead of our forecast. BWE reported 2M revenue and parent NPAT of VND520bn (+14% YoY; USD20.6mn) and VND110bn (+7% YoY; USD4.3mn), respectively. We estimate the consolidated NPAT of ~VND116bn (+7% YoY, USD4.6mn), completing 16% of our full-year forecasts. In addition, BWE has not recorded VND130bn revenue from the waste and waste-water segment. Therefore, this NPAT is slightly higher than our expectation. 2M NPAT YoY growth is mainly from strong 2M sales volume growth of 10% YoY while we forecast 2024 volume growth of 5% YoY.

BWE’s management sets its 2024 guidance with sales volume of 192.7 million cubic meters in 2024 (+5% YoY), parent revenue of VND4.1tn (+4% YoY), and parent NPAT of at least VND700bn (+17% YoY). BWE’s management maintains a conservative view towards its financial expenses from the USD-denominated loans and a assumption that the Fed will not significantly reduce interest rates in 2024. Additionally, it targets to maintain its water loss ratio at lower than 5% (vs 5.08% ratio of 2023), waste treatment volume growth of 3% YoY, and waterwaste treatment volume growth of 11% YoY.

Total capex is estimated at ~VND3tn over the three-year period, which is mainly from bonds, short-term loans, and ADB loans with low interest rates.  BWE’s management is actively working on further expanding its water generation capacity and distribution network, as well as other potential M&A activities. They target to further increase an additional 30,000 cbm/day capacity of the Chon Thanh water plant, double the capacity of the Nhi Thanh water plant from 60,000 cbm/day to 120,000 cbm/day (Q3 2024), and increase the Gia Tan water plant JSC capacity from 50,000 to 100,000 cbm/day by 2025. Regarding the waste treatment segment, it plans to expand its incinerator capacity from 200 tonnes/day, generating 5MW of power, to 500 tonnes/day, generating 17MW of power (Q3 2024). We note that this waste-to-energy project was inaugurated in January 2024 and potentially helps buffer BWE’s electricity cost. They plan for a 10MW internal usage and sales of the remainder of 7MW to EVN.

Its 32%-stake associate - Gia Tan Water Plant in Dong Nai Province expects another losing year before generating positive NPAT. Gia Tan water plant reported a 2023 loss of VND71bn, which contributes a negative VND24bn towards BWE’s 2023 NPAT. The 2023 loss is due to its higher financial expenses (+157% YoY) and higher depreciation cost (+152% YoY), despite a triple-digit growth in revenue (+118% YoY on volume growth of 128% YoY). According to Gia Tan water’s 2024 AGM materials, revenue and NPAT guidance for 2024 are set at VN46bn and negative VN62bn, respectively. BWE’s management is optimistic that it will reach the break-even point and generate positive NPAT soon, following the expected demand from the Long Thanh Highway and satellite industrial parks, as well as a lower financial expense.

FY2023 marked a flourishing year for BWE’s aggressive M&A approach. As of end-2023, BWE has 6 subsidiaries, 7 associate companies, and 4 joint ventures companies. Of which, 4 subsidiaries (Biwase Long An, Can Giuoc, Bang Tam, Chau Thanh) and 3 associate companies (LAW, NQB, Thu Thua) were acquired in FY2023. These companies are a testatment to BWE’s management’s prioritization in further penetration into other provinces.

2023 fund allocation approved. Shareholders approved the 2023 NPAT allocation as follows: 1) 39.6% for 2023 stock dividend, amounting to VND270bn, 2) 35% towards its development fund, 3) 14% towards bonus & welfare funds (of which 13% is for the bonus fund), and 4) 3% to renumeration funds.

2024 fund allocation approved. Shareholders approved the 2024 NPAT allocation to the aforementioned funds with the same percentages in 2023. However, BWE will return to pay cash dividends for 2024 at 13% of par value.

Shareholders approved the management’s proposal to close three branches and re-establish them as new legal entities. Specifically, Chon Thanh Water Plant will be established as Biwase Binh Phuoc Water JSC, the Urban Service Branch to be Biwase Production, Trade, and Service One Member LLC., and the Waste Treatment Branch to be Biwase Environmental Science and Technology One Member LLC. (Vietcap translated)

Shareholders approved the procedure proposal for virtual and hybrid general meetings. BWE’s management proposed regulations for online and hybrid general meetings, in which shareholders can attend the general meetings (both annual and extraordinary general meetings) and cast their votes through the electronic voting system, using their provided identifiable accounts. Other procedures are similar to that of the in-person meetings.

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