- The water saga is one step closer to closure with Puncak Niaga Holdings Bhd’s shareholders giving the much-needed approval yesterday in an EGM for the disposal of the group’s assets and operations to the Selangor government.

- Recall that last Nov, the group had entered into a sales and purchase agreement 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 will distribute RM534.3mil (or RM1/share on a fully-diluted basis) from the proceeds as cash dividends to shareholders within three months.

- The disposals are expected to be completed by 16 Jan.

- Post disposal, the oil & gas business will become the group’s main contributor. With RM1bil proceeds in hand, the group is looking to expand into either the oil & gas or oil palm plantation business.

- To this end, its executive chairman Tan Sri Rozali Ismail said that the group is in talks with parties in China, Latin American and Asean to provide maintenance services for the oil & gas industry.

- Currently, the group has a sole derrick lay barge which is tied to its Pan Malaysia job worth ~RM1.8bil over three years.

- As for plantations, Rozali said the group has identified a few estates and is currently studying the valuations and investment viability.

- We believe that the group’s future business plans are crucial in order to ensure sustained profitability. Note that Puncak may be classified as a cash company and trigger Practice Note 17 following the completion of the disposals.

- As for its current jobs in hand, the group is kept busy with its water-related construction jobs (~RM544mil secured last year). It is also among four shortlisted for the RM800mil incinerator job in Kepong.

- We maintain HOLD until we see further clarity on the group’s future plans beyond the dividend windfall.

Source: AmeSecurities