SECTOR FOCUS OF THE DAY
Water Sector : One step
closer
NEUTRAL
The Selangor state’s water restructuring exercise is one
step closer to finalisation following reports last Friday that Puncak Niaga Sdn
Bhd (PNSB) and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) have agreed to
accept the Selangor government’s takeover offer.
The acceptances by the two companies were announced in a
press statement by the Federal and state governments. However, Puncak Niaga
Holdings Bhd has not made an announcement to Bursa Malaysia. The offer is
exactly the same as the one made in Feb and last Nov; which comprises:- (i)
RM2.5bil for PNSB; and (ii) RM3.1bil for Syabas.
Following the acceptance of the offer by PNSB and Syabas (as
well as K.Abass), the governments have agreed to postpone the invocation of
Section 114 of the Water Services Industry Act 2006 (WASIA), which entails a
takeover of water operations. Based on Puncak Niaga’s FY13 audited
accounts, we estimate that PNSB is being offered at 1.3x its book value of
RM2bil, while Syabas is being offered against a negative book value of
RM2.04bil (-RM1.4bil based on Puncak Niaga’s 70% stake in Syabas). Recall
that water assets in other states were acquired at ~1x of the respective book
values.
The offers will still subject to shareholders’ approval in
EGMs to be held soon. With the latest acceptances, SPLASH is last player left
that is needed to end the water saga. However, recall that Gamuda has rejected
the latest offer as the equity payment for SPLASH was only RM250mil, which is
10% of its net book value of RM2.54bil as at end-Dec 2013. We opine that a fair
valuation for SPLASH would remain crucial to push the restructuring exercise to
its final resolution. Maintain NEUTRAL.
Others :
CIMB Group : Foreign shareholding rose for the first time in
eleven months HOLD
Economic Update : Current account improves further to
RM19.8bil in 1Q14 (BOP)
Economic Update : GDP grows on strong net trades in
1Q14 (GDP)
QUICK TAKES
Eastern & Oriental : State government’s endorsement by
4QCY14 BUY
Felda Global Ventures : To acquire Kulim’s
NBPOL? HOLD
Plantation Sector : Newsflow for week 12 -16 May
OVERWEIGHT
NEWS HIGHLIGHTS
Aviation Sector : ‘Higher PSCs will affect LCCs’ survival’
Automotive Sector : Passenger and commercial vehicles’ sales
in April increased to 58,732 units from 52,489 units in the same month last
year.
Oil and Gas Sector : Petronas ensuring smooth running of
Canadian LNG project
DISCLAIMER:
The information and opinions in this report were prepared by
AmResearch Sdn Bhd. The investments discussed or recommended in this report may
not be suitable for all investors. This report has been prepared for
information purposes only and is not an offer to sell or a solicitation to buy
any securities. The directors and employees of AmResearch Sdn Bhd may from time
to time have a position in or with the securities mentioned herein. Members of
the AmInvestment Group and their affiliates may provide services to any company
and affiliates of such companies whose securities are mentioned herein. The
information herein was obtained or derived from sources that we believe are
reliable, but while all reasonable care has been taken to ensure that stated
facts are accurate and opinions fair and reasonable, we do not represent that
it is accurate or complete and it should not be relied upon as such. No
liability can be accepted for any loss that may arise from the use of this
report. All opinions and estimates included in this report constitute our
judgement as of this date and are subject to change without notice.
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