Puncak  Niaga’s (PNH)  1HFY13  net  profit  of  MYR122.0m  was  below onsensus  estimates  but  within  ours,  at  43.2%  and  52.4%  of  the respective  full-year  estimates.  No  changes  to  our  earnings  estimates and SOP-based FV of MYR2.51. Nonetheless, we are upgrading our call to NEUTRAL following the recent share price weakness.  
 
- Decent 1HFY13. PNH’s 1HFY13 revenue came in 21.0% y-o-y lower at MYR519.2m due to lower contribution from its oil and gas (O&G) division following Petronas’ decision to defer some of its existing works to next year.  EBITDA,  however,  dipped  by  a  more  moderate  12.8%  y-o-y  to MYR237.8m  on  lower  operating  expenses  at  its  water  segment.  All  in, PNH  registered  1HFY13  core  earnings  MYR122.0m,  down  only  by  a marginal  7.0%  y-o-y,  buoyed  by  a  lower  effective  tax  rate.  The group’s 2QFY13  revenue  of  MYR317.9m  and  net  profit  of  MYR61.3m  were weaker y-o-y due to lower contribution from the O&G unit but marginally higher  q-o-q  as  the  improvement  in  O&G  was  mostly  offset  by  lower income from its water division.

- MYR1.78bn  receivables  due  from  Syabas.  In  1QFY13,  Management implemented  MFRS11,  which  allows  it  to  account  for  its  70%  stake  in Syabas  under  the  equity  method  instead  of  the  consolidation  method previously.  As  of  June  2013,  the  trade  receivables  due  from  Syabas amounted to MYR1.78bn. Syabas, meanwhile, has submitted water tariff compensation  claims  totaling  MYR2.97bn  as  of  June  2013. We  caution that  the  timing  of  settlement  of  these  claims  remains  unclear  at  this juncture  given  that  the  legal  tussle  between  Syabas  and  the  Selangor state government are still ongoing.

- Upgrade  to  NEUTRAL.  With  the  results  coming  in  largely  in  line,  we make no changes to our estimates for now. Our SOP-based FV remains unchanged  at  MYR2.51,  pegged  at  a  35%  discount  due  to  inherent political risks. Nonetheless, following the stock’s recent price weakness, we upgrade our call to NEUTRAL (from SELL). The key re-rating catalyst is potentially positive progress in moves to consolidate Selangor’s water industry  amid  ongoing  negotiations  between  the  Federal  and  Selangor State governments.

Source: RHB