Puncak Niaga Holdings Bhd
(Sept 15, RM2.59)
Maintain hold call with an unchanged fair value of RM2.80: Puncak Niaga Holdings Bhd has given another extension until Oct 15 (from Sept 14) for the completion of its water asset sale. 

It told Bursa Malaysia on Monday that it hopes it will be the final extension for the fulfilment of all conditions precedent in the sale and purchase agreement. 

Puncak Niaga said that its board may consider the possibility of terminating the agreement with Pengurusan Air Selangor Sdn Bhd (Air Selangor) if there is a further extension. 

It will then seek various avenues to protect its rights and its shareholders’ rights, including the right to seek legal recourse against Air Selangor. 

Following the signing of four agreements between Air Selangor and Pengurusan Aset Air Bhd last week, we are hopeful that Puncak Niaga’s water deal can be completed within the expected time frame. 

It was reported that the four agreements (facility agreement, lease agreement, rights of use agreement and settlement agreement) are essentially conditions precedent to effect the master agreement signed a year ago. 

Air Selangor is then expected to take over Puncak Niaga (M) Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd within two weeks, and Konsortium Abass Sdn Bhd within the next four months. 

Recall that Puncak Niaga will receive RM1.55 billion in proceeds when the takeover by Air Selangor is completed. 

Following that, we expect a payment of RM534 million (or RM1 per share on a fully diluted basis) as cash dividends to be made by year end. 

Notwithstanding the latest update, we remain hopeful that the water deal with Puncak Niaga will finally be completed soon. 

This is premised on the commitment by both the federal and Selangor state governments to complete the exercise soon and ensure water supply sustainability. 

As it is, the treated water reserve margin in Selangor is already below 1%, while non-revenue water is about 32%. 

Beyond the dividend payout, Puncak Niaga’s future prospects hinge on the utilisation of RM1 billion of the proceeds for either oil and gas or plantation ventures. — AmResearch, Sept 15

This article first appeared in digitaledge Daily, on September 17, 2015.