- We maintain HOLD on Puncak Niaga Holdings Bhd with an unchanged fair value of RM3.40/share.

- Puncak Niaga announced yesterday that it has reached an agreement in principle for Kumpulan Darul Ehsan Bhd’s (KDEB) proposed acquisition of its 100% stake in Puncak Niaga Sdn Bhd (PNSB), and 70% stake in SYABAS.

- The agreement was reached following a series of negotiations between Puncak, KDEB/Selangor government and the Federal government.

- The agreement is based on the following fundamental terms and conditions:- (i) a net cash consideration of RM1.55bil payable to Puncak;

(ii) the proposed takeover to include the takeover offer of all assets and liabilities of PNSB in relation its concession business;

(iii) the non-concession related assets, liabilities and businesses of PNSB will be returned to PNSB at no cost; and

(iv) the offer is subject to a due diligence being satisfactory to KDEB, Puncak, and Pengurusan Aset Air Bhd.

- Following this, the parties will negotiate further before reaching a definitive agreement. The deal is also conditional on Puncak shareholders’ approval in an EGM to be conducted soon.

- Based on the offer, Puncak will be getting RM1.55bil or RM2.91/share (based on the fully-diluted share base of 534mil shares).

- The price is equivalent to the equity portion (PNSB: RM1.1bil; SYABAS: RM437mil) of the offer that was made last Feb. However, the “assets to be assumed” portion has been eliminated, and in return, KDEB will assume the whole assets and liabilities.

- We view the change positively, as it appears to clear uncertainties over SYABAS’ receivables owed by the state government (for delays in tariff hikes), and its payables to the water treatment players.

- We believe that a portion of the proceeds would be retained as the group is looking at acquiring assets for its oil & gas arm. Maintain HOLD.

Source: AmeSecurities