- We maintain BUY on Puncak Niaga Holdings with a fair value of RM4.03/share, based on a 40% discount to its RNAV of RM6.72/share.

- Puncak Niaga’s earnings fell by 7% YoY to RM122mil for 1HFY13 from RM131mil a year earlier. This accounts for 51% and 43% of our and consensus estimates respectively.

- Group turnover declined by 21% YoY to RM519.2mil from RM657mil a year earlier. This was due mainly to a lower contribution from its oil & gas and construction segment which declined by 38% YoY.

- Puncak Niaga’s oil & gas unit saw lower contributions as a result of Petronas deferring several works to next year. Meanwhile, there were additional costs incurred for its construction business.

- As for its water treatment business (held via 100%-owned unit Puncak Niaga Sdn Bhd), there was a marginal 2.5% YoY revenue increase to RM285mil for the 1HFY13 period.

- Note that since the beginning of this year, its 70%-owned SYABAS has been equityaccounted following the adoption of MFRS10 accounting standard.

- Recent newsflow suggests that the Federal and state government might finally hammer through a deal to resolve the long-standing water impasse by year-end.

- Just last weekend, Selangor Menteri Besar Tan Sri Khalid Ibrahim was quoted in The Star as saying that he hoped to begin water talks with the Federal government as early as this week. We base our fair value on the fourth and previous offer that was made in Feb 2013 and assume that the offer is net of water-related liabilities.

- We opine a deal may finally go through this time around if the offer is attractive. Note that Puncak Niaga had just recently bought a RM2 company to venture into the plantation business. It is also acquiring a 100% stake in construction firm Lambang Sejagat Sdn Bhd for RM1.7mil.

Source: AmeSecurities