Selangor’s state government, via Kump. Darul Ehsan Bhd (KDEB,) has made a fresh offer of RM9.65bn to take over all of the state’s four water concession companies. Puncak Niaga acknowledged receipt of the two offer letters by fax but gave no details. Our back of envelope calculation suggests that the offers to Puncak and Syabas may total RM6.8bn, but we are unable to assess their actual valuations given the scant details. With the polls getting closer, we rule out the possibility of any deals being concluded for now. We keep our Trading BUY call on Puncak given its undemanding valuation, rising O&G contribution, plus buoyant sentiments due to the takeover offers. Our FV stands at RM2.08.
Fresh offer. The Malaysian Insider reported that the Selangor State Government made a fresh offer of RM9.65bn to take over all four water concession companies. Menteri Besar Tan Sri Khalid Ibrahim said all liabilities of the companies will also be absorbed by the state investment arm Kumpulan Darul Ehsan Berhad (KDEB), which will then act as the equity owner. KDEB will also form a special purpose vehicle to manage the takeovers. Separately, Puncak Niaga told Bursa Malaysia that it has received two faxed letters from KDEB in respect to this matter.
Attractive offers? Other than the scant news reports on the takeover offers, Kumpulan Perangsang Selangor has made two separate announcements in relation to the offers from its holding company, KDEB, to acquire 100% equity stake in Syarikat Pengeluar Air Selangor Holdings (SPLASH) and 90.83% interest in Titisan Modal SB for RM1.83bn and RM992.2m respectively. Puncak Niaga’s management in its statement to Bursa Malaysia said it needs to consult its board of directors before making any announcements pertaining to the content of the offers. However, our back of the envelop calculation shows that the combined offer to acquire Puncak Niaga SB and Syabas could be RM6.8bn after stripping out the value of the two other offers. We are not overly excited as believe the amount must first settle the company’s borrowings amounting to RM5.58bn as at 30 Sep 2012, the majority of which is related to its water business. Also, the offer for Syabas may have included the value of the 30% minority stake in the concessionaire currently owned by the Selangor Government via KDEB. We need more details to properly assess the actual value of this fresh offer.
No immediate deal in sight. Offer price aside, we suspect the proposed acquisitions are also affected by various uncertainties given the fact that the polls could be called anytime in the next few weeks and this type of M&As could take months to complete. As KDEB is an investment arm of the Selangor State administration, the impending dissolution of the State Assembly may cause confusion as to the ultimate decision maker of this exercise. Undeniable, KDEB has its own professional management but we believe this type of transactions will need the blessings of the Menteri Besar and possibly the approval of the State Assembly.
Fresh offer. The Malaysian Insider reported that the Selangor State Government made a fresh offer of RM9.65bn to take over all four water concession companies. Menteri Besar Tan Sri Khalid Ibrahim said all liabilities of the companies will also be absorbed by the state investment arm Kumpulan Darul Ehsan Berhad (KDEB), which will then act as the equity owner. KDEB will also form a special purpose vehicle to manage the takeovers. Separately, Puncak Niaga told Bursa Malaysia that it has received two faxed letters from KDEB in respect to this matter.
Attractive offers? Other than the scant news reports on the takeover offers, Kumpulan Perangsang Selangor has made two separate announcements in relation to the offers from its holding company, KDEB, to acquire 100% equity stake in Syarikat Pengeluar Air Selangor Holdings (SPLASH) and 90.83% interest in Titisan Modal SB for RM1.83bn and RM992.2m respectively. Puncak Niaga’s management in its statement to Bursa Malaysia said it needs to consult its board of directors before making any announcements pertaining to the content of the offers. However, our back of the envelop calculation shows that the combined offer to acquire Puncak Niaga SB and Syabas could be RM6.8bn after stripping out the value of the two other offers. We are not overly excited as believe the amount must first settle the company’s borrowings amounting to RM5.58bn as at 30 Sep 2012, the majority of which is related to its water business. Also, the offer for Syabas may have included the value of the 30% minority stake in the concessionaire currently owned by the Selangor Government via KDEB. We need more details to properly assess the actual value of this fresh offer.
No immediate deal in sight. Offer price aside, we suspect the proposed acquisitions are also affected by various uncertainties given the fact that the polls could be called anytime in the next few weeks and this type of M&As could take months to complete. As KDEB is an investment arm of the Selangor State administration, the impending dissolution of the State Assembly may cause confusion as to the ultimate decision maker of this exercise. Undeniable, KDEB has its own professional management but we believe this type of transactions will need the blessings of the Menteri Besar and possibly the approval of the State Assembly.
Reiterate Trading BUY. While we suspect there will be no immediate deal in sight from KDEB’s latest offers, we think any offer will serve to warm investors up to Puncak Niaga. We also focus on the company undemanding valuation although we acknowledge that the major improvements to the company’s bottomline of late were mainly attributed to compensation for the non-implementation of higher water tariffs, which is currently only in the books and will not involve any physical cash inflow until the court delivers its judgment. Nonetheless, the improvement in its P&L is indeed another sentiment booster. In addition, the group’s successful move into the lucrative O&G field on top of its rural water supply projects are also sufficient reasons for investors to cheer. Therefore, we are maintaining our Trading BUY recommendation, with the stock’s fair value kept at RM2.08. This implies a mere 3x forward FY12 EPS.
Source: OSK
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