Puncak Niaga (PNH) announced on Bursa that it has received an offer of MYR1.5bn from the Selangor state government via KDEB to take over its water operations. The Federal Government has also agreed to take over the water assets by assuming the liabilities involved. Upon acceptance of the offer, PNH would receive net proceeds of MYR3.78 per share. Upgrade to BUY (from Sell), with our SOP-based FV bumped up to MYR5.22 (from MYR2.51).
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Revised terms. In this revised offer from Kumpulan Darul Ehsan Bhd (KDEB), while the equity value to be paid to PNH for its 100% stake in Puncak Niaga SB (PNSB) and 70% stake in Syarikat Bekalan Air Selangor (Syabas) remained unchanged at MYR1.5bn, we note that the Federal Government, via Pengurusan Aset Air Bhd (PAAB), has agreed to assume all outstanding water-related debts owed by the duo. In essence, this implies that PNH would walk away with net proceeds of MYR1.5bn vis-à-vis our previous estimate of MYR1.0bn, as we had previously factored in the settlement of water-related borrowings by PNH.
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Board to accept the offer. Although the offer comes in below PNSB’ and Syabas’ (based on PNH’s 70% stake) combined book value of an estimated MYR1.6bn-1.7bn, we believe PNH’s board of directors would likely accept the latest offer to put an end to the ongoing legal tussle between PNH and the Selangor state government. We expect PNH’s board to revert by 4 Dec and an EGM to be held in 1Q14.
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Upgrade to BUY. Upon acceptance of the offer, PNH would receive net proceeds of MYR3.78 per share vis-à-vis its current share price of MYR3.34. In view of the quantum offered, we advise PNH’s existing shareholders to accept the offer. Post-disposal of its water-related assets and operations, PNH would be left with its O&G operations via its whollyowned subsidiary, GOM Resources, which operates a derrick lay barge and is widely anticipated to secure some works from the MYR10bn Pan Malaysia Transport and Installation contracts. We revisited our SOP valuation to take into account: i) the potential cash infusion of MYR1.5bn (from MYR1.0bn), and ii) the removal of the 35% discount now that the offer is firm. With that, we derive our new FV of MYR5.22 (from MYR2.51). In view of the potential upside of over 50%, we upgrade our recommendation on PNH to BUY (from Sell).
Financial Exhibits
SWOT Analysis
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One of the largest treated water suppliers in Selangor state
Company Profile
Puncak Niaga operates water treatment facilities, as well as supplies and distributes treated water in the Klang Valley via its 70%-owned Syabas.
Recommendation Chart
Source: RHB
ghtee
will it be durian falling ,if PNH mojor shareholder accept the offer
2013-11-22 10:19