Puncak Niaga Holdings Bhd
(Nov 2, RM1.19)
Maintain buy with fair value RM1.82: Puncak Niaga informed Bursa Malaysia on Tuesday that its wholly-owned subsidiary, Puncak Niaga Sdn Bhd (PNSB), has entered into a conditional sale and purchase agreement (SPA) with Acqua SPV Bhd to sell its entire holdings of PNSB redeemable, insecured, coupon bearing notes (JNA notes) to Acqua for a total consideration of RM328.1 million.

Separately, Puncak Niaga said its newly acquired wholly-owned subsidiary, Global Offshore (M) Sdn Bhd (GOM), had accepted syndicated credit facilities from OCBC Bank (M) Bhd and Hong Leong Bank Bhd.

The credit facility, amounting to RM546.9 million, was issued by Puncak Niaga on Nov 20, 2001. It allows note holders to exercise a put option to the company to repurchase all or some of their notes, which fall due on Nov 18, 2011. Puncak Niaga also has a call option that gives the company the right to redeem all outstanding JNA notes at the full outstanding principal amount on the call date. The outstanding principal amount of the notes, including the fifth mandatory partial repayment of RM54.7 million, is RM328.1 million.

We welcome the move to restructure the notes that will push forward the mandatory annual redemption total of RM54.7 million at the original repayment period from 2011 to 2016 to November 2016 to 2019. Already, the group's cash flow is strained amid the prolonged tussle with the Selangor government over the tariff hike and other issues.

Nonetheless, the extended repayment period under the new arrangement will incur a much higher coupon rate of 5.68% per year compared with the previous 2.5% up to Nov 2011 and 3.5% per year thereafter, causing its financing costs to bloat. Acqua is a wholly-owned subsidiary of Pengurusan Aset Air Bhd (PAAB).

OCBC Bank and Hong Leong Bank have granted GOM a US$43.9 million (RM137.4 million) revolving credit, a RM20 million letter of credit (sub-limit), an up to RM50 million bank guarantee and an up to RM95 million foreign currency exchange line. The credit facilities effectively give this new kid on the block a major boost to participate in the lucrative oil and gas (O&G) business.

We understand from Datuk Hashim Mahfar, Puncak Niaga managing director, at the company's last analyst briefing that GOM expects to benefit from Petroliam Nasional Bhd's O&G capital expenditure projects, namely offshore installation and construction (OIC) in the area of replacing old O&G pipelines, platforms and so on.

GOM and SapuraCrest Bhd are the only two players in this segment in Malaysia. Hashim sees RM400 million to RM500 million worth of contracts from Petronas annually over the next four to five years.

We are generally positive on the JNA notes refinancing and syndicated credit facilities obtained by GOM. While the earlier expected participation in Indah Water Konsortium Sdn Bhd's (IWK) potential privatisation is still pending, we see a good 'trading buy' opportunity in Puncak Niaga, especially if its share price drifts down further. We are also keeping our 'fair value' of RM1.82, derived from 0.7 times FY11 book value, which was the benchmark number before IC Interpretation 12 adjustment. ' OSK Research, Nov 2


This article appeared in The Edge Financial Daily, November 3, 2011.