The  Sun  Daily  quoted  Selangor  MB  Tan  Sri  Abdul  Khalid  Ibrahim  as saying  that  he  has  received  Prime  Minister  Datuk  Seri  Najib  Adbul Razak’s approval on the proposed consolidation of Selangor’s water industry. Given the political interests involved, we are taking a wait-and-see approach until we get more affirmative indications from the Federal Government. Maintain NEUTRAL on Puncak, with our FV unchanged at MYR2.00.

-  Consolidation  for  real?  Selangor  Menteri  Besar  Tan  Sri  Abdul  Khalid Ibrahim  was  quoted  as  saying  that  he  has  received  a  letter  from  Prime Minister  Datuk  Seri  Najib  Abdul  Razak  agreeing  to  the  state’s previous proposal  relating  to  the  acquisition  of  the  existing  assets  of  all  four  of Selangor’s water  concessionaires  by  the  Federal  Government.  He  was quoted as saying that “…Selangor is all set to bring the supply of water under its control before the end of the year."

- Terms  not  disclosed.  The  news  article  did  not  contain  any  ballpark figures or details on the terms of the agreement. In its last proposal, the Selangor  state  government  had  offered  Puncak  an  equity  value  of MYR1.1bn  for  its  water  operations  while  valuing  Syabas’ equity portion at  MYR438m.  These  are  to  be  forked  out  by  the  Selangor  state government.  Separately,  the  plan  also  proposed  that  the  Federal Government  pays  MYR1.4bn  and  MYR2.7bn  respectively  via Pengurusan  Aset  Air  Bhd  to  Puncak  and  Syabas  to  take  over  their existing water assets.

- NEUTRAL.  Due  to  the  lack  of  more  specific  financial  details  on  the agreement, we are maintaining our NEUTRAL call on Puncak. In view of the political interests and sensitivities involved, we would rather wait until there  are  more  affirmative  indications  from  the  Federal  Government  on the  long-awaited  consolidation  of  Selangor’s water industry.  Maintain NEUTRAL on Puncak, with our FV unchanged at MYR2.00, based on a 3x FY13 P/E.

Source: RHB