Bangkok : Thailand's largest private tap water supplier plans to expand into thirsty Middle Eastern markets and expects to seal a deal by the end of this year.
Thai Tap Water Supply, 26 per cent-owned by Japan's Mitsui & Co, will join a crowded market in the water-starved Arab world, where UN studies suggest agricultural output will drop sharply unless more water can be supplied.
Managing director Sompodh Sripoom said he is considering an overseas investment to build up its portfolio amid promising growth at home, where he expects a rise in net profit in the first quarter from last year on demand from industrial estates.
"We are excited about the opportunity there," Sompodh said.
"There is a need for the utilities management there and there is a chance that they would let a private sector to participate in the government project."
Infrastructure upgrade
The Middle East is looking to improve water infrastructure and considering "more cost-efficient" alternatives from Asian operators than those from Europe, he said, declining to identify a specific country for investment.
KT Zmico Securities analyst Terapatr Mathanukraw said it was unclear whether Thai Tap Water could pull off a Middle East deal.
"It might be too early to say right now if this project will eventually happen. We don't know what sort of connection they have there and how difficult it is to enter the region since this will be the first foreign move for them," Terapatr said.
"But with that being said, the company's financial strength is not going to be a problem."
Thai Tap Water, founded by the country's second-largest builder, Ch Karnchang which is still a major shareholder, has a market value of $545 million (Dh2 billion), trailing larger regional peers Hong Kong-listed Guangdong Investment and Manila Water of the Philippines.
The company, with cashflow of 2.8 billion baht, has a 30-year contract with Thailand's Provincial Waterworks Authority to supply treated water.
It is allowed to adjust water tariffs every year based on inflation. This year it charged a 4 per cent increase in water for 2010.
Double-digit growth
It raised its water supply volume by 12.6 per cent to a record 320,594 square metres per day in February, its first double-digit growth since November 2008.
"Demand for a basic commodity like water is rising super fast compared to last year," Sompodh said.
"Our company is naturally going to benefit from a higher profit in the first quarter."
