Puncak Niaga shareholders set to enjoy windfall

PETALING JAYA: The eight-year tussle for the water assets transfer in Selangor has finally come to an end and Puncak Niaga Holdings Bhd is expected to issue a special dividend following the deal.
“We are of the opinion that investors should remain invested to profit from the special dividend post completion of the water transfer exercise. However, the future of the company (Puncak Niaga) remains uncertain as its other core businesses are rather weak, especially its oil and gas segment, which largely relies on its derrick lay barge,” MIDF Research said in its report yesterday.

MIDF Research said although its total percentage return exceeds its threshold level to warrant a “buy” recommendation, it is making an exception by maintaining its neutral stance on Puncak Niaga with a target price of RM3.16 per share.
The long-drawn water restructuring deal in Selangor finally reached its conclusion following the signing of four agreements on Tuesday between Pengurusan Aset Air Bhd and Pengurusan Air Selangor Sdn Bhd (PASSB).
The completion of the deal signals the long awaited finality of Puncak Niaga Holdings Bhd’s sale of water assets to PASSB for RM1.55 billion.
The sale and purchase agreement to dispose of 100% and 70% stakes in Puncak Niaga Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd was signed last November.
AmResearch understands that Puncak Niaga is expected to receive the proceeds when the takeover by PASSB is completed.
“We understand from management that it intends to pay out RM534 million (or RM1 per share on a fully diluted basis) as cash dividends soon following the completion of the deal. Puncak Niaga’s future prospects hinge on the utilisation of the RM1 billion proceeds for either oil & gas or plantation ventures.
“Our hold call and fair value of RM2.80 per share remain as prospects remain cloudy beyond dividend payout,” said AmResearch.
With the completion of the water deal, the research house expects talks between the state and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) to shift to a higher gear. It is also hopeful that negotiations can be completed in a shorter time frame instead of July next year as reported in the media.
“We also expect the Langat 2 project to remain on track for completion in 2019 given the commitments by both federal and state governments. Last month, raw water was transferred for the first time from Sg Semantan in Pahang to Sg Langat in Selangor as part of a mitigation move to maintain the water level at the Sg Langat dam. The completion of Langat 2 is crucial to ensure water supply sustainability in the state.”
AmResearch added that while the latest development has been expected, it is nevertheless still positive on the news.
“We now await a conclusion with Splash for the ultimate closure to the water restructuring exercise in the state. We maintain our neutral call on the sector,” it said.
AmResearch maintained its “buy” call on Gamuda Bhd with an unchanged fair value of RM5.80 per share.
“This pegs the stock at a 10% discount to net asset value per share,” it said, which retained earnings estimates for Gamuda pending more fresh leads on Splash.
However, it believed that prospects of any special distributions arising from the disposal of Gamuda’s water units will largely hinge on its capital requirements under the upcoming MRT Line 2 and Penang Transport Master Plan projects, which may raise its NAV by RM1.26 per share.