Consolidation of Biwase Long An (previously known as DNP Long An Water Infrastructure Investment JSC) marks BWE’s biggest M&A success, giving it full control rights. On May 31, 2023, BWE increased its stake in Biwase Long An from 25.4% to 91.6%. BWE has spent a total of VND561bn (USD23.8mn) on Biwase Long An. The estimated acquisition price of VND14,960/share implies an acquisition P/E at 16.3x, which we believe is a good price due to Biwase Long An’s huge growth potential. BWE and TDM have established a presence in seven out of Vietnam’s 63 provinces/municipalities in what is typically a strict State-owned business. We estimate BWE to have a ~30%-50% market share in the water business in southwestern Vietnam and 30% (with the potential to increase to 50% market share) in Dong Nai Province (see page 4).

We forecast Biwase Long An’s NPAT to grow at a CAGR of 53% in 2022-2027 due to strong volume growth and double-digit growth in the water tariff. According to BWE, the People’s Committee of Long An Province approved a special water tariff for Biwase Long An - Phase 2 in June 2023, which is ~10%-15% higher than the water tariff for Phase 1. As such, management believes Biwase Long An’s profitability could be similar to BWE’s water supply business in Binh Duong, which has a five-year average gross profit margin of 52%. Biwase Long An is working to double the capacity of its Nhi Thanh water plant from 60,000 cbm/day to 120,000 cbm/day (equivalent to 15% of BWE’s capacity — VND1.0tn capex) and targets this to come online in early 2025. Management is confident that Biwase Long An can fully utilize the new capacity in one to two years as demand is ~2x-3x vs the current supply. We forecast Biwase Long An’s profit contribution to BWE at VND44bn (6% of BWE’s NPAT-MI) in 2023 before increasing to VND225bn (10% of BWE’s NPAT-MI) in 2027. Biwase Long An – Phase 3, which will expand capacity to 180,000 cbm/day, should contribute more significantly to BWE’s long-term earnings (see page 5).

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