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Investment Thesis
– Defensive industry providing essential goods and service, which stalely grow 10%/year without disruption.
– Water supply is less impacted by Covid pandemic outbreak since the demand for house consumption grow but demand for manufacturing reduce, then canceling the negative impact.
– Binh Duong population growth and high immigration rate are the base for future demand, higher than Hanoi and HCMC. FDI has been grew significantly and Binh Duong is in top 5 of FDI attraction.
– Owning monopoly pipeline distributor Biwase in Binh Duong Province. Selling price will adjusted upward in 2023, estimated at average of 5%/year
– Widen gap between BWE and TDM capitalization now reaches 250%, higher than average of 142% since TDM is holding 38.5% of BWE share outstanding.
Risk
– Selling price is limited by authority.
– Upside potential is limited by revenue while downside risk is not.
– High cost of investment when expand to Dong Nai and Binh Phuoc
– Pandemic impact on water using for manufacturing.
Recommendation:
Reflecting the fact mentioned above, we estimate that TDM’s price (not including BWE) is about 22,300 VND/share. We think current market value of BWE, reflect intrinsic value of BWE, which is from 33,000 VND/share to 40,000 VND/share. Then the value of TDM should be from 35,000 VND/share to 43,720 VND/share.
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