Utilities sector (Water): Oasis amid the storm

Most defensive sector among the dividend plays
We see Thailand’s water sector as the most defensive among the dividend plays, even compared to power developers. This is due to a sustainable strong dividend from continuously increasing earnings secured under long-term concessions with the government. The sector is an oligopoly dominated by a small number of players, namely Eastern Water Resources Development and Management (EASTW) and Thai Tap Water Supply (TTW). The stocks have more than ten years of concessions remaining and attractive dividend yields of 6-9% on our FY12-13F. In our view, this is a high risk adjusted return given their low market volatility, which may be what investors need to shore up their portfolios in these market conditions.

 

KGI