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Puncak Niaga - Turning to new ventures HOLD

kiasutrader
Publish date: Wed, 29 Feb 2012, 10:13 PM
kiasutrader
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Maintain HOLD on Puncak Niaga Holdings with an unchangedfair value of RM1.60/share ' pegged to a 65% discount to its estimated break-up value. Puncak reported a 4QFY11net profit of RM9mil, bringing FY11 net loss to a lower amount of RM9mil vs. aRM72mil loss a year earlier. 

Puncak's results came in ahead of both ours, and the street expectationsof full-year losses to the tune of RM20mil and RM31mil, respectively. Thepositive variance, in our view, largely stemmed from a sizeable reversal in itsminority interest position, particularly in 4QFY11 (~RM31mil).  

FY11 results were impacted by the adoption of the IC Interpretation12, through retrospective changes to its P&L statement. However, againstlast year's RM72mil loss, this was a significant improvement due tocontributions from its new oil& gas businesses.

We have cut the group's FY12F-13F net profit forecasts by 35%and 19%, respectively, to input higher operating costs for its water divisionand notional interest cost on concession liabilities as a result of IC12. Thistruncates a scheduled tariff hike for SYABAS in 2012 that we continue to assumeand billings from ongoing works for its oil & gas division.

Puncak created some buzz when in 4Q10, it bought out the remaining40% interest in Global Offshore Malaysia and KGL Ltd for a combined US$59mil(~RM177mil). 

The new acquisitions are supposed to spearhead Puncak's forayinto the oil & gas sector. Apart from pipe-laying contracts, the group iseyeing a role in the development of marginal oil fields and brownfields. 

The group has in recent months also made overtures  to expand its scope into other venturesbeyond its water business in Selangor. These include: (i) The privatisation of IndahWater Konsortium (IWK) under a 1MDB-led consortium; and (ii) Scouting for solidwaste management contracts in Cambodia. 

But, our call on Puncak remains a HOLD. Prospects for Puncak'snon-water ventures remain fluid at this juncture against an evolving politicalbackdrop. 

 Its share price hassince retraced by 28% after scaling a high of RM1.89/share earlier this month,after market anticipation on a state-led takeover of water assets in Selangor eventuallyfizzled out. 

We would only turn more constructive on the stock when greaterclarity surfaced on the restructuring of Selangor's fragmented water industry.We do not envisage this  to happen beforethe 13th General Election.  

Source: AmeSeurities
PUNCAK (6807)
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