• BWE announced its Q4 2024 results with net revenue of VND1.2tn (+6% YoY) and reported NPAT-MI of VND145bn (flat YoY). The increase in revenue was mainly due to the water supply segment growing 7% YoY, driven by sales volume growth of 9% YoY. However, NPAT-MI was flat due to an 11% YoY increase in financial expenses in which there was an abnormal unclassified financial expense of VND29bn, and VND53bn (+8% YoY) of realized and unrealized forex losses.
• In 2024, BWE recorded revenue of VND3.96tn (+12% YoY) and NPAT-MI of VND642bn (-5% YoY), which are equivalent to 101% and 90% of our full-year forecasts, respectively. The decline in 2024 NPAT was due to (1) a net loss of VND18bn from the wastewater treatment segment stemming from VND146bn of unrecorded revenue due to incomplete paperwork and (2) a 142% YoY increase in FX losses.
• Excluding forex losses, we estimate BWE’s core NPAT-MI to be VND763bn (+5% YoY, 8% higher than the preliminary numbers), completing 96% of our full-year forecast. This is slightly lower than our expectations as: there was 1) unrecorded revenue from the wastewater treatment segment and 2) lower-than-expected revenue and margins from the waste segment, with NPAT completing 40% of our forecast.
• M&A of Tan Hiep Water JSC implies a P/E of 9x. At the year-end, short-term debt increased 66% QoQ to VND2.5tn, mainly due to financing the M&A of a 43% stake in Tan Hiep Water as BWE advanced VND765bn (under other receivables) to the seller. BWE claims to have spent a total of VND805bn on this M&A, which implies a P/E of 9x based on Tan Hiep Water’s estimated NPAT of VND200bn for FY2024. BWE expects to finish the transaction in Q1. 
• Tan Hiep Water JSC has a charter capital of VND240bn and is currently owned by Saigon Water Supply Ltd - Sawaco (25%), Saigon Water Infras (UpCOM: SII, 43%), and REE (32%). Tan Hiep Water’s plant is a young water plant, coming online in 2017, has a capacity of 300,000 cbm/day (~ a third of BWE’s capacity), processes raw water from the Saigon River, and sells it to Sawaco. Tan Hiep Water is a highly profitable company and pays high cash dividends. It had a net profit margin of 44% in 2023 and an average of 41% during 2021-2023 (according to SII’s annual report). SII expects this margin to expand further as the project reaches full capacity and debts are fully repaid. We estimate that Tan Hiep Water paid high cash dividends from 2021 to 2023, averaging VND6,200/share. This implies a potential dividend yield of 7-8% based on the acquisition price. 
• However, we see downside risk to our 2025F NPAT-MI forecast as the short-term loan balance at end-2024 was 2x higher than our projection and the waste segment’s  margin and profit were weaker than expected, pending a fuller review.
• We currently have an OUTPERFORM rating for BWE with a target price of VND51,400/share.

BWE’s 2024 results

Source: BWE, Vietcap (*) Due to partial revenue was reclassified under Trading & Other segment, (**) Due to abnormal financial expense and high interest expense in Q4.

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