M&A activities drive vibrant water industry deals

Facilities of Bình Dương Water Environment JSC (Biwase). Photo biwase.com.vn

HÀ NỘI There has been a significant surge in merger and acquisition (M&A) activities within the water industry in recent times.

DNP Water Investment Joint Stock Company (DNP Water) has recently registered to acquire nearly 20.4 million shares of Saigon Water Infrastructure Joint Stock Company (Saigon Water or SII). The transaction is expected to take place from December 11, 2023, to January 9, 2024, through purchasing agreements from existing shareholders, without a public offer.

In return, DNP Water will provide capital support to help SII pay off existing debts, up to a maximum of 20 per cent of SII's total assets as recorded in the most recent financial report.

If the M&A plan is successful, DNP Water's ownership in Saigon Water will increase from over 12 million units (accounting for 19 per cent of charter capital) to over 32.6 million units (50.61 per cent), effectively making Saigon Water its subsidiary.

DNP Water currently owns 12 subsidiaries and seven affiliated companies in the water industry. Additionally, it holds two water projects with investment capital of over VNĐ300 billion in Quảng Bình and Khánh Hoà, with ownership ratios of 43 per cent and 45 per cent, respectively.

DNP Water is expected to spend over VNĐ428.4 billion to acquire Saigon Water, based on SII's market price of VNĐ21,000 per share.

In 2022, Bình Dương Water Environment Corporation (Biwase or BWE) acquired shares of Cần Thơ Water Supply and Sewerage Joint Stock Company and Cần Thơ Water Supply and Sewerage Joint Stock Company Cần Thơ 2, transforming both companies into affiliated entities with ownership ratios of 24.64 per cent and 48.86 per cent, respectively, by the end of 2022.

Biwase also increased its ownership in Gia Tân Water Supply Company and Đồng Nai Water Supply Company, with ownership rates of 31.52 per cent and 18.53 per cent, respectively, by the end of 2022.

In addition to DNP Water's acquisition of Saigon Water this year, there have been other notable M&A deals. Biwase increased its ownership in Vĩnh Long Water Supply Joint Stock Company (VLW), Long An Water Supply and Sewerage Joint Stock Company (LAW), and JSC DNP Long An Water Infrastructure Investment. Thủ Dầu Một Water Joint Stock Company (TDM) purchased more shares and became a significant shareholder in Cà Mau Water Supply Joint Stock Company (CMW). TDM also plans to acquire more shares in DNP Quảng Bình Water Infrastructure Investment Joint Stock Company.

Industry potential

Water is essential for people's lives, and most water industry enterprises maintain stable profits. In the first nine months of 2023, Thủ Dầu Một Water Joint Stock Company achieved revenue of VNĐ457 billion and a profit of VNĐ240 billion, representing a 28 per cent and 64 per cent increase compared to the same period last year.

Previously, Thủ Dầu Một invested nearly VNĐ1.1 trillion in Biwase, with an ownership ratio of 37.42 per cent. In the first nine months of the year, it received dividends of over VNĐ94 billion from this investment.

Lâm Đồng Water Supply and Sewerage Joint Stock Company (LDW) recorded revenue of VNĐ226.2 billion and a profit after tax of VNĐ62.9 billion, reflecting an 8 per cent and 40.4 per cent increase, respectively, over the same period last year.

Biwase accumulated revenue of VNĐ2.39 trillion and a profit after tax of VNĐ528.7 billion in the first nine months of the year, slightly lower than last year. However, over the past ten years (2012-2022), the company has recorded an average revenue growth of 20.1 per cent and an average gross profit growth of 18.4 per cent. Biwase has maintained a stable gross profit margin of over 40 per cent, which is relatively high compared to many other businesses.

Securities experts believe that the water industry will experience positive growth prospects due to the large population, increasing urbanisation process, improved living standards, and increased foreign direct investment.

In a recent analysis report, Bảo Việt Securities Company (BVSC) stated that Biwase will benefit from the rising water consumption demand in Binh Duong province as foreign direct investment increases, particularly in industrial parks.

Biwase is the sole enterprise distributing clean water in the area. 

According to the estimates provided by the Research Department of SSI Securities Company (SSI Research), the water demand is projected to grow steadily at approximately 5 per cent per year. This positive growth outlook catalyses the continued vibrancy of M&A deals within the water industry.