HLIB Research initiates Taliworks coverage with ‘buy’

PETALING JAYA: HLIB Research has initiated coverage on Taliworks Corp Bhd with a “buy” recommendation, calling it an appealing investment case, given its concession businesses in different sectors that enjoy stable growth profile coupled with reduced vulnerability to idiosyncratic risk.
“Taliworks provides investors exposure to the potential settlement of Selangor’s water restructuring and a potential huge cash pile, which can increase earnings per share significantly via M&A (merger and acquisition),” HLIB said in its initiation coverage report yesterday.
Taliworks is a conglomerate involved in water, highway concessions and waste-related businesses. Most of its operations have multi-year concession agreements with predictable rate schedules.
As a beneficiary of Selangor’s water restructuring, HLIB said Taliworks has trade receivables amounting to RM471 million owed by Syarikat Pengeluar Air Selangor Holdings Bhd (Splash).
Splash is expected to be acquired by the Selangor state government in the near-term. This allows the full repayment of the above mentioned receivables by Splash, providing a strong boost to Taliworks’ cash pile.
The research house projects FY17-18 earnings growth of 34% and 5%, driven by the performance of its concession business and new recurring income stream from newly acquired SWM Environment Holdings Sdn Bhd.
It said Taliworks has a strong relationship with the Employees Provident Fund and is expected to continue partnering it for future acquisitions of concession assets.
HLIB said Taliworks will have a strong balance sheet after the repayment of trade receivables by Splash. It gave a target price of RM1.85 for Taliworks with a 25% upside to the current share price. The stock closed 3 sen higher at RM1.48 yesterday.