Puncak Niaga Holdings Bhd yesterday said it had received the final payment of RM1.55bn (estimated at RM2.90/share) from Pengurusan Air Selangor Sdn Bhd (Air Selangor) on the Oct 15 deadline and that the proposed disposals of its water assets have been completed. With the completion of the deal yesterday, Puncak Niaga (M) Sdn Bhd (PNSB) and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) ceased to be a subsidiary and joint venture company of Puncak Niaga respectively, with immediate effect. (Source: Starbiz, Bursa)

Comments: With the sale of its water assets concluded, there is now better visibility on Puncak’s plan to distribute RM1.00/share in special dividends. We maintain our HOLD rating and TP of RM2.60 (10% discount to the cash proceeds of RM2.90/share received for the disposed water assets). The discount is to account for Puncak’s existing challenging business in the oil & gas industry due to low crude oil prices. With the conclusion of the disposal of its water assets, the construction business (for water related projects such as laying sewerage pipes and building water treatment plants) and oil & gas business (transmission and installation of pipes) are the key revenue drivers for Puncak going forward.

Source: Macquarie Research - 16 Oct 2015