Journey to Wealth
Puncak Niaga - Free warrants and bond issue
News Puncak announced that it had proposed a free warrants issue and a 5-year convertible Sukuk bond issue to finance its working capital and acquisition of new assets. The utilisation of the Sukuk is earmarked for an acquisition opportunity in the near term while the unutilised Sukuk proceeds will be used to re-finance the current debt in its oil and gas subsidiary KGL Ltd.
Comments The warrants will be issued on the basis of 1 warrant for every 10 existing shares. The conversion price is at Puncak's par value i.e. RM1.00 per share. The expected money raised from the warrants (RM40m) is earmarked for its working capital purpose. This exercise is eventually to reward the shareholders instead of paying cash dividends to them.
The RM165m convertible Sukuk bond will have a 5-year tenure with its conversion price yet to be finalised. However, based on the proposal, the conversion price should be at a premium to the 5-day VWAP of Puncak's shares. Assuming a 10% premium to the current price of RM1.29 as the conversion price, this will enlarge the company's share base by 26% (post-warrant conversion).
We are neutral on this corporate exercise as the future acquisitions of assets in the oil and gas sector will somewhat mitigate Puncak's dependency on its current controversial and uncertain water business.
Outlook We are encouraged with Puncak's move to diversify into other businesses such as oil and gas as this will minimise the risk of the uncertainties in its Selangor water business.
The oil and gas division is expected to record at least a RM500m revenue in FY12. As at 1H12, it has already achieved RM280m and RM35m in revenue and pre-tax profit respectively.
Forecast No changes to our FY12-13E earnings.
Rating MAINTAIN OUTPERFORM
Its water asset is currently trading at a deep discount and its oil and gas potential is still underestimated by the market.
Valuation We have increased slightly our TP to RM3.05 (based on SOP valuation) from RM3.01 as we tweaked our assumption higher for its oil and gas contribution. We have also factored in the 10% dilution of the warrants exercise.
Risks Offer price from SSG being lower than our valuation for its water business.
Source: Kenanga
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
Market Buzz
More articles on Journey to Wealth
Ekovest: No plan to launch another offer for Iskandar Waterfront City
Created by kiasutrader | Mar 29, 2018
Kenanga Research - On our Portfolio - Parliament dissolution around the corner?
Created by kiasutrader | Mar 25, 2013
Plantation Sector - Proposed accounting standard scrapped OVERWEIGHT
Created by kiasutrader | Mar 25, 2013
Pavilion Reit - Limited upside, earnings upside have been priced in HOLD
Created by kiasutrader | Mar 25, 2013
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
Latest Videos
Apps
Top Articles
2
3
Koon Yew Yin's Blog
CPO price is rising rapidly as shown by chart below - Koon Yew Yin
4
Axcapital's investment blog
KAB - Executing its way to a record quarter. Could more Petronas contracts be coming?
5
Mercury Securities Research
6
BFM Podcast
7
8
BFM Podcast
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
