Puncak Niaga to pay out dividends following disposal of water assets

PETALING JAYA: Puncak Niaga Holdings Bhd (PNHB), which finally sold its its water treatment and supply business to Pengurusan Air Selangor Sdn Bhd (PASSB) for RM1.5 billion, said it will use proceeds for future investments and a RM534.5 million cash payout to shareholders.
The company controlled by Tan Sri Rozali Ismail will use RM1.02 billion from the disposal for future investments which may include expansion into the oil and gas businesses and "explore opportunities in other sectors such as the oil palm plantation sector."
AmResearch Sdn Bhd's analyst Max Koh said based on the PNHB's current shares outstanding, the payout translates to RM1.29 per share, or a yield of 37%.
"We advise shareholders to accumulate to enjoy the dividend windfall of RM1.29 per share (or RM1 per share based on the fully-diluted shares of 534.6 million)," said Koh who maintained his "hold" recommendation on PNHB with an unchanged fair value of RM3.40 per share.
Late Tuesday, PNHB entered into a sale and purchase agreement (SPA) to dispose of its 100% and 70% stakes in Puncak Niaga Sdn Bhd (PNSB) and Syarikat Bekalan Air Selangor Bhd (Syabas), respectively, to Pengurusan Air Selangor Sdn Bhd (PASSB) for RM1.55 billion.
PASSB is a wholly-owned subsidiary of state investment arm Kumpulan Darul Ehsan Bhd (KDEB).
The proposed disposals include the entire equity interest in PNSB comprising 10 million shares worth RM1.07 billion and 48 million cumulative convertible redeemable preference shares worth RM48 million for a total cash consideration of RM1.118 billion.
The 70% equity stake in loss-making Syabas comprises 45 million shares for RM225.8 million, and RM212 million nominal value of redeemable convertible unsecured loan stocks for RM212 million.
With the signing of the SPA, PASSB will take over the entire operations and maintenance of the water treatment plants and water supply distribution services which are currently managed by PNSB and Syabas.
The SPA is conditional upon the approval of the shareholders of PNHB, bond holders and relevant government agencies.
The offer for PNSB was at a discount of between 14.1% to 24.8% and the offer for Syabas was at a discount of between 65.2% to 69.5%, of the respective indicative valuation prices.
The consideration is based on the offer by KDEB that Puncak had accepted in-principle in June this year.
Upon the completion of the proposed disposal, Puncak is expected to realise a net gain of RM414.5 million attributable to the owners of the company.
Meanwhile, MIDF Research analyst Aaron Tan Wei Min was neutral on PNHB pending guidance from the company's plans post disposal.
He pointed out that PNHB is likely be classified as a cash company post-disposal and trigger the Practice Note 17 designated company and as such, will be given 12 months to regularise its business.
"We are maintaining our neutral call pending guidance from the management as to the future direction of the listed entity, especially in regards with its oil and gas business," Tan said in a report yesterday.
Following the water assets disposal, Tan revised PNHB's target price to RM3.76 per share from RM4.44 per share previously.
"We are also revising our target price-to-earnings (PER) for the company's oil and gas valuation from 14 times previously to 12 times due to the less-than-impressive performance thus far of the oil and gas business," he added.
PNHB is expected to call for an EGM soon with the proposed disposal to be completed in first quarter of 2015.