Puncak  Niaga’s  FY13  net  profit  of  MYR200.9m  fell  below  both consensus  and our expectations,  reaching just  76.9% and 86.8% of the respective full-year estimates,  as  Petronas deferred  several  of its O&G works  to  2014.  That  said,  we  foresee  its  O&G  segment  to  rebound strongly  in  FY14,  having  secured  the  MYR1.8bn  Package  B  of  Pan Malaysia offshore transportation  and installation contract in Dec 2013. BUY, with our SOP-based FV unchanged at MYR5.22.

• Dragged  down  by  O&G.  Puncak  Niaga  (Puncak)’s  FY13  revenue dipped 1.6% y-o-y to MYR1.15bn,  as growth in its water segment was mostly offset by  lower contributions  from its oil and gas (O&G) division,following Petronas’ decision to defer some of its existing works to  FY14. PBT, however,  sank  13.4% y-o-y to MYR236.7m,  aggravated by higher financing  costs.  All  in,  Puncak  registered  FY13  core  earnings  of MYR200.0m,  down  by  a  more  moderate  3.0%  y-o-y,  owing  to  positive taxation  recognised  in  4QFY13.  The  group’s  4QFY13  revenue  of MYR294.9m and net profit of MYR23.0m were weaker  q-o-q and  y-o-y, due to lower contributions from its O&G unit.
• To  revert  state  offer  by  10  March.  Puncak  announced  that  it  has received  a  revised  offer  from  the  Selangor  state  government  via Kumpulan Darul Ehsan Bhd (KDEB). While the valuation pegged to both its water-related assets and operations remains unchanged, we note that the clause on the assumptions of water-related liabilities by the Federal Government via  Pengurusan Aset Air  is better  spelled out  in this latest offer.  This  implies  that  Puncak  would  receive  net  proceeds  of MYR1.56bn upon completion of the proposal  (which translates into net cash  per  share  of  MYR3.78),  vis-à-vis  MYR1.0bn  previously  if  Puncak were  to  repay  all  its  water-related  borrowings.  We  expect  Puncak’s board to accept the offer and to revert to KDEB by 10 Mar.    
• Maintain BUY.  We make no changes to our estimates for now,  as we foresee its O&G segment to rebound strongly in FY14 ,  having secured the MYR1.8bn Package B of Pan Malaysia offshore transportation and installation contract in Dec 2013.  Maintain  BUY  and a  MYR5.22  FV,  as we  foresee  Puncak’s  potential  acceptance  of  Selangor  state government’s latest offer to further re-rate its share price.

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 7 0%-owned Syarikat Bekalan Air Selangor SB (Syabas).

Recommendation Chart

Source: RHB