To our disappointment, Puncak (PNH)’s management did not accept the Selangor  state  govt’s  latest  takeover  offer  and  has  instead  proposed changes to the  offer terms.  As we perceive  this  as a minor setback, we remain hopeful that  Selangor’s  proposed  consolidation exercise would be completed sooner rather than later upon PAAB’s blessings. Maintain BUY on PNH, with our FV unchanged at MYR5.22.

• Puncak  counters  with  proposed  changes.  In  its  filing  with  Bursa Malaysia,  PNH  proposed  some  changes  to  the  terms  in  the  Selangor state government’s offer. These include: 1)  Total equity contribution to be paid to PNH should include an annual compounded return of 15%; 2)  Removal  of  the  requirement  for  due  diligence  post-acceptance  of the offer; and 3)  Waiving  the requirement for the acquisition of water assets by the Federal Government via Pengurusan Aset Air Bhd (PAAB).
• PAAB  now  the  major  hurdle.  We  believe  the  major  hurdle  here  is PAAB’s willingness  to absorb  the  MYR556.3m  shortfall between PNH’s water assets and water-related borrowings.  Much to our  chagrin, PAAB had informed  PNH that it  will  not commit  to assuming the  latter’s  waterrelated  debts.  This  stand  contradicts  the  Selangor  state  government’s latest  offer,  which  stated  that  PAAB  will  assume  both  the  assets  and liabilities of PNH’s water operations.
• Maintain  BUY.  That  said,  we  still  expect  PNH,  the  Selangor  state government  and  the Federal Government  to  resolve  their differences  as soon  as  possible  to  meet  the  deadline  imposed  by  the  Federal Government to conclude talks by the end of this year.  In view of this,  we remain  hopeful  that  Selangor’s  proposed  consolidation  of  the  state’s water assets  would be completed sooner rather than later upon PAAB giving  consent.  Maintain  BUY  on  PNH,  with  our  FV  unchanged  at MYR5.22.

Financial Exhibits

SWOT Analysis

• One of the largest treated water suppliers in Selangor

Company Profile
Puncak Niaga operates  water treatment facilities, as well as supplies and distributes treated water in the Klang Valley via 70%-owned Syarikat Bekalan Air Selangor SB (Syabas).

Recommendation Chart

Source: RHB