- Puncak Niaga Holdings announced on Bursa Malaysia yesterday that its 70%-owned subsidiary, Syarikat Bekalan Air Selangor (Syabas), has received another RM151mil in soft loans from the federal government.

- The government loans consist of two loan facilities of RM75mil and RM76mil respectively.

- Puncak Niaga said the RM75mil loan would be used to finance the replacement of old and critical pipes at 16 critical areas in Selangor, KL and Putrajaya. It is part of the Water Supply Mitigation Programme.

- Meanwhile, the other RM76mil loan would be used to finance works to reduce non-revenue losses as part of the Water Supply Mitigation Programme phase 2.

- The tenure of the loans is 20 years from the first drawdown date, with a grace period of 3 years from the effective date. Syabas has to repay the debt in 17 years commencing from the expiry of the grace period.

- The loans have an interest of 3% per annum and a default interest of 5% per annum.

- Including these new loans, Syabas has received RM741.8mil in loans from the Federal government in four years. The previous loans were used to finance its capex and for water payment purchased from water treatment operators in Selangor, i.e. Puncak Niaga Sdn Bhd, Konsortium Abass Sdn Bhd, and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH).

- We maintain BUY on Puncak Niaga as we await a new offer from the Selangor state government to purchase the water assets by year-end. In recent months, both the federal and state government has affirmed their intention to conclude a deal soon.

- The new deal is expected to be similar to the terms of the fourth and previous offer, which is based on:- i) 12% return on equity; and ii) water assets to be assumed.

- Our fair value of RM4.02/share is based on a 40% discount to its NAV. Our NAV is based on the previous offer and is assumed net of debt. 

Source: AmeSecurities