HOLD (Fair Value: 2.92)

• Puncak Niaga Holdings Bhd has granted a further extension of two months until 14Sept for the fulfilment of the conditions precedent in the sales and purchaseagreement with the Selangor state.
• This is the seventh extension since the group signed the agreement withPengurusan Air Selangor Sdn Bhd.
• The group said the decision is premised on the fact that both the Federal andSelangor governments had finally inked the supplementary agreement last Friday(10 July).
• We view Puncak’s move as a positive indication that the deal will be concludedsoon.
• Recall that both the Federal and state government had finally reached abreakthrough by executing the supplementary agreement last Friday followingmonths of dispute over certain issues.
• Puncak’s announcement is in line with the supplementary agreement, which allowsanother 60 days for the completion of the master agreement (from 10 July). This is toallow both governments to iron out the remaining issues in executing the deal.
• After seven years of impasse, we are now hopeful of a resolution to the water saga.
• Recall that Puncak is expected to received RM1.55bil in proceeds from the sale ofassets, of which RM534mil (or RM1.00/share on a fully-diluted basis) will bedistributed to shareholders.
• As such, we believe that investors may accumulate shares for the dividend windfall.Nevertheless, our HOLD call remains as prospects remain cloudy beyond that.Puncak is allocating ~RM1bil from the proceeds to explore new businessopportunities in the oil & gas and plantation sectors.
• We believe that the state will begin earnest discussions with SPLASH once the dealwith Puncak is completed.

Source: AmeSecurities Research - 15 Jul 2015