Stock Name: PUNCAK
Company Name: PUNCAK NIAGA HOLDINGS BHD
Research House: KENANGA



KENANGA Research has maintained its "buy" recommendation on Puncak Niaga Holdings, with an unchanged target price of RM3.74 despite the proposed water tariff hike.

It was reported in a local newspaper that the federal government has agreed in principle for 15 per cent to 20 per cent water tariff for Syarikat Bekalan Air Selangor Sdn Bhd (Syabas).

Nonetheless, the report stated that the decision has yet to get the approval from Selangor state government as per the concession agreement.

To recap, Syabas was supposed to get a 37 per cent tariff hike in the financial year 20009 which was delayed due to a consolidation tussle.

"We still like Puncak Niaga for takeover angle and the fundamental lies on its concession agreement which could provide some push factor to bid for higher price during the consolidation process," Kenanga said in a research note today.

The research house said it believed that the proposed tariff hike is initiated by the federal government to mitigate further downgrade in credit rating for the water related bonds.

Syabas is a 70 per cent owned by Puncak Niaga.

Kenanga said the proposed tariff hike is positive for the sector as a whole but this proposal is not expected to resolve Puncak Niaga's financial issue in the long run.

Both Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) and Konsortium Abbas Sdn Bhd made a claim for about RM250 million from Puncak Niaga for unpaid receiveable since late financial year 2008.

"We believe that should Syabas gets the tariff hike, it will add another RM18.5 million a month due to delay in tariff," Kenanga said.

Currently, the state's water assets are parked under four concessionaires comprising Puncak Niaga, Syabas, Splash and Konsortium Abbas. -- BERNAMA