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

- For the 9MFY14F period, Puncak’s revenue fell 7% YoY to RM792mil.

- It reported 3QFY14 core earnings of RM60.3mil (flattish QoQ), bringing 9M earnings to RM166.7mil (-6.3% YoY).

- The results made up 67% of our previous estimate and 73% of consensus forecasts. We have cut our FY14F earnings by 11%.

- The group’s pre-tax profit fell 16% YoY to RM200.7mil mainly due to lower contributions from the oil & gas and construction segments, higher finance costs, and provision on impairment loss on trade receivables.

- Its water division reported a lower PBIT of RM315mil (-14% YoY) mainly due to higher operating expenses and provision on impairment loss on trade receivables.

- Positively, losses at its oil & gas division contracted to -RM3.6mil (vs. -RM10.6mil a year earlier) for the 9M period due to higher contributions from GOM Resources. Recall that works for its Pan Malaysia job had only commenced in April this year following a deferment by Petronas last year.

- Its construction division reported a PBIT of RM6mil (vs. a loss of RM1.5mil a year earlier) for the 9M period, due to contributions from new jobs it had secured this year (worth RM544mil).

- Recall that the group had entered into a sales and purchase agreement earlier this month to dispose of its 100% and 70% stakes in Puncak Niaga Sdn Bhd (PNSB) and Syabas, respectively, to Pengurusan Aset Air Selangor Sdn Bhd (PASSB) for RM1.55bil.

- Puncak is expected to distribute RM534.3mil (or RM1.29/share based on current shares outstanding) from the proceeds as cash dividends to shareholders within three months. The EGM is expected to be called soon with the completion of the disposal by 1Q15.

- Post-disposal, Puncak may be classified as a cash company and trigger Practice Note 17. The group intends to utilise RM1.02bil from the proceeds for future investments which may include expansion into the oil & gas and plantation businesses. The group is also one of four shortlisted for the RM800mil incinerator job in Kepong.

- We maintain HOLD until we see further clarity on the group’s future business plans

Source: AmeSecurities