- We maintain HOLD on Puncak Niaga Holdings Bhd with an unchanged fair value of RM3.40/share – a 20% discount to our sum-of-parts (SOP) value.
- Puncak Niaga reported 1QFY14F earnings of RM47mil, which is 24% lower than RM61mil a year earlier. Revenue was down by 25% YoY to RM151mil.
- Its earnings made up 19% of our forecast and 16% of consensus FY14F estimates.
- The weaker earnings were mainly due to slower contribution from its oil & gas division. The division’s LBIT widened to RM18mil from RM8mil a year earlier due to higher operating costs and deferred works by Petronas.
- Meanwhile, its water division reported a flattish EBIT of RM126mil on the back of a marginal 4% drop in revenue, due to higher operating expenses.
- Its construction division reported EBIT of RM0.3mil, an improvement from a loss of RM6mil last year.
- Note that the group has secured RM544mil worth of contract jobs this year, which will take 2 to 4 years to complete.
- Notable jobs include the construction of a D44 sewer pipe network in Bunus worth RM394mil, and a water treatment plant in Sarikei worth RM97mil.
- But the projects have yet to generate revenue as they are still in the initial stages. Moving forward, we expect earnings to be supported by maiden contributions from these jobs. The group is hoping to secure more similar jobs this year.
- The 2Q should also see maiden contributions from its T&I Petronas job, as its sole derrick laying barge has commenced works in April. We expect contribution of ~RM600mil per annum from the 3-year job for Petronas.
- Puncak Niaga has yet to firm any deal with the Federal and state governments for the takeover of its water assets.
- It noted that it is still in talks with the two governments to reach a solution to the end the water impasse.
- We maintain HOLD. Our SOP takes into account the current offer, which valuation has remained unchanged since last November.
Source: AmeSecurities
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