- Puncak Niaga Holdings Bhd’s executive chairman and major shareholder Tan Sri Rozali Ismail said that the group would call for an EGM soon to present the Federal government’s proposal and takeover offer for the water concessionaires to the shareholders.

- According to a Starbiz report, Rozali said that he did not object to the implementation of Section 114 of the Water Services Industry Act 2006 (WASIA) if it was for “the national interest of the country and in accordance with the existing law and provisions under the Federal Constitution”.

- He also said that he believed that Puncak’s major and minor shareholders would prioritise the interest of the consumers in the Klang Valley and national interest over commercial considerations.

- Nevertheless, he appealed for both the Federal and state governments to consider the investments that have been put in by the shareholders of Puncak into Puncak Niaga Sdn Bhd (PNSB) and Syabas.

- These include:- (i) Puncak assuming RM1.25bil (including interest) of debts to the state government, and RM4.8bil owed to water treatment plant (WTP) operators during the privatisation exercise; (ii) Syabas spending over RM2.8bil to finance water supply projects; (iii) Puncak spending RM1.7bil to build Sungai Selangor plant Phase 2 (SSSP2) and refurbishing WTPs for RM350mil; and (iv) Puncak investing RM270mil in Syabas via shares and loan notes.

- In our view, Rozali’s statement hints that the group is still open to negotiations to facilitate the restructuring of water assets in the state. After all, the implementation of Section 114 only allows the taking control of operations, and not the transfer of asset ownership.

- We opine that commercial approach based on a consensus valuation is still the most viable option to resolve the long-standing issue. Note that the previous assets in the other states were concluded at 1x book value. We maintain HOLD on Puncak Niaga.

Source: AmeSecurities