Taliworks close to sealing deal to acquire Silk

PETALING JAYA: Water and infrastructure company Taliworks Corp Bhd is closer to concluding its deal to buy Silk Holdings Bhd's wholly-owned subsidiary Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd (Silk) within the next few months.
Speaking to reporters after the company's AGM and EGM here yesterday, Taliworks chief investment officer Kevin Chin Soong Jin said both parties are in discussions on pricing, given that traffic volume has come down after a toll rate increase last October.
"We expect this acquisition to conclude in the next few months ... the outcome is favourable. The motivation for Taliworks to buy and the vendor to sell is there," he noted.
Silk is the concession holder for the 37km Kajang Traffic Dispersal Ring Road (Kajang Silk Highway). It has a 33-year concession to operate and maintain the highway. The concession period ends on July 31, 2037.
At yesterday's EGM, Taliworks also received shareholders' approval for the disposal of its entire China waste and wastewater management business for US$54.6 million (RM219.5 million) and the acquisition of a 35% stake in SWM Environment Holdings Sdn Bhd for RM245 million.
SWM Environment, in which the Employees Provident Fund (EPF) owns a 35% stake, has a 22-year concession to provide solid waste collection services and public cleansing management services in Negri Sembilan, Malacca and Johor. It manages 4,500 to 5,000 tonnes of waste a day across 27,560 sq km.
The China business disposal will relieve Taliworks from imminent capital expenditure commitments and to redirect the disposal proceeds to other mature business investments as part of its new focus area.
"The Chinese division has been making slight losses in the past few years. When we sold it, we realised RM230 million cash, all the gearing disappeared, we no longer have a loss-making division and we'll replace it with SWM Environment," Chin noted.
The company's gearing will be reduced from 0.64 to 0.36 times following the disposal.
Chin said Taliworks will continue to secure its acquisition targets in the mature operational cash-generating utilities and infrastructure businesses in Malaysia and the developed markets.
Taliworks reported a 69.8% drop in net profit to RM91.56 million in 2015 from RM303.16 million in 2014, due to the absence of one-off disposal gain.
For 2016, Chin is optimistic that the company will deliver a good performace considering that it will no longer need to consolidate the gearing from its investment in China. It is now tendering for RM500 million RM600 million worth of water-related jobs for its construction business. The outstanding order book stands at over RM450 million.
On a separate note, EPF deputy CEO (investment division) Datuk Mohamad Nasir Ab Latif said the fund will always look at opportunities to partner Taliworks following the joint venture in Cheras-Kajang Highway, New North Klang Straits Bypass Expressway and, the latest, SWM Environment.
Asked if EPF plans to increase its shareholding in Taliworks, he said it will do so when the valuations are right. EPF currenty owns a 2.62% stake in Taliworks.
On other investment opportunities, EPF CEO Datuk Shahril Ridza Ridzuan said it is targeting to acquire more infrastructure assets.
"We're always looking at assets that provide the right return and cash flow. We're open to new acquisitions. It's not necessarily DUKE (Duta-Ulu Kelang Expressway), but there are other opportunities that we're looking at," he said when asked if EPF has an interest in DUKE.