AmWatch - Puncak Niaga : Finally inks deal; cash dividend of RM1.29/share HOLD, 12 Nov 2014

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Puncak Niaga : Finally inks deal; cash dividend of RM1.29/share                 HOLD

We maintain HOLD on Puncak Niaga Holdings Bhd with an unchanged fair value of RM3.40/share. The company has yesterday entered into a sale and purchase agreement to dispose of its 100% and 70% stakes in Puncak Niaga Sdn Bhd (PNSB) and Syabas, respectively, to Pengurusan Aset Air Selangor Sdn Bhd (PASSB) for RM1.55bil.

The proposed disposals comprise:- (i) Entire equity interest in PNSB comprising 10mil shares worth RM1.07bil and 48mil cumulative convertible redeemable preference shares (PNSB CCRPS) worth RM48mil for a total cash consideration of RM1.118mil; and (ii) 70% equity stake in Syabas comprising 45mil Syabas shares for RM225.8mil, and RM212mil nominal value of redeemable convertible unsecured loan stocks (Syabas RCULS) for RM212mil.

Puncak intends to distribute RM534.3mil from the proceeds as cash dividends to shareholders within three months. Based on the current shares outstanding, the payout translates to RM1.29/share, or a yield of 37%. Puncak intends to utilise RM1.02bil from the proceeds for future investments which may include expansion into the oil & gas businesses and other ventures.

The inking of the agreement is much-welcomed following protracted talks between the various stakeholders to restructure the water supply business in the state for years.

We advise shareholders to accumulate to enjoy the dividend windfall of RM1.29/share (or RM1/share based on the fully-diluted shares of 534.6mil). The EGM is expected to be called soon with the proposed disposal to be completed in 1Q15.

However post-disposal, Puncak may be classified as a cash company and trigger Practice Note 17 given that water treatment and supply is a core business for the group. Hence, we maintain our HOLD call on Puncak until we see further clarity on the group’s future business plans.

Others :

Genting Singapore : Optimistic on Japan and South Korea             HOLD

Economic Update : Factory output moderates to 5.4% on slower demand for E&E products 

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