Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research reaffirms its Buy rating on Gamuda and sum-of-parts derived target price of RM4.40 following the recent developments in the Selangor water industry.

The Edge FinancialDaily reported on Tuesday, Sept 28 that Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) will likely receive a 15%-20% water tariff hike which has been agreed by the federal government.

The Edge FD also said the increment would be a lifesaver for the water treatment players, Syarikat Pengeluar Air Sungai Selangor Holdings Bhd (Splash) and Konsortium Abass Sdn Bhd, which are both on the verge of defaulting on their debt commitments.

Hwang DBS Vickers Research said the 15%-20% water tariff hike was however lower than the stipulated 37% as per its concesssion agreement it was supposed to receive early last year.

'The tariff hike has not been approved by the Selangor State government which was against it given that Syabas had not fulfilled the majority of the terms of its concession agreement,' it said.

The research house said while this piece of news will be positive for SPLASH, Gamuda's 40%-owned water concession, it may still be difficult to get the Selangor State Government's approval.