Puncak oh Puncak

15 October is the DAY....

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Puncak Niaga to distribute special dividend by 1Q16
By CIMB Research / The Edge Financial Daily   | October 6, 2015 : 11:13 AM MYT   

This article first appeared in The Edge Financial Daily, on October 6, 2015.

Puncak Niaga Holdings Bhd ( Valuation: 2.10, Fundamental: 1.70)
(Oct 5, RM2.71)
Upgrade to add from hold, with a higher target price of RM3.40 from RM2.55: The Selangor state government has ensured that the conditions precedent for the RM1.6 billion sale and purchase agreement with Puncak Niaga Holdings will be met and completed by the deadline on Oct 15.

It stressed that there will be no more delays and that Puncak Niaga’s two water operations will come under Pengurusan Air Selangor Sdn Bhd by then. The state government is currently finalising some technical issues.

This news is positive and should put to rest additional concerns regarding how fast Puncak Niaga’s RM1.6 billion water deal can be revived following the signing of the supplementary agreement between the federal and Selangor state governments on Sept 8. 

Going by the recent developments leading up to this news, there are now credible reasons to anticipate a successful completion of Puncak Niaga’s deal by Oct 15, being the latest extension. Further delays are highly unlikely.

The RM1.6 billion combined valuation offered by the state government for Puncak Niaga’s 100% stake in Puncak Niaga Sdn Bhd (water treatment concession) and 70% stake in Syarikat Bekalan Air Selangor Sdn. Bhd (water distribution concession) remains unchanged and accepted by Puncak.

With the final stage of the state’s first water acquisition deal underway in the next one to two weeks, Puncak Niaga will be exiting its water business and focusing on its oil and gas, and construction outfits.

Our earnings per share forecasts are retained pending the completion of the deal. 

Recall that Puncak Niaga’s board had long ago approved a bumper special dividend arising from the RM1.6 billion cash proceeds, which translates into RM1 per share.

Assuming that the SPA can be completed and finalised by end-Oct, the management earlier guided that Puncak Niaga should be able to announce and distribute the special dividends within fourth quarter of 2015 (4Q15) or 1Q16 the latest. — CIMB Research, Oct 5