KiniBiz  reported  that  Puncak  agrees  to  Selangor  State  Government’s latest  takeover  offer  of  its  water  assets  and  operations.  Should  this materialize,  we  estimate  that  Puncak  is  set  to  receive  net  proceeds amounting  to  MYR1.56bn,  which  translates  into  MYR3.78  per  share. Nonetheless,  we  maintain  NEUTRAL  with  an  unchanged  MYR3.13  FV, pending  management’s  official  confirmation  and  more  clarity  on  the pricing and implementation timeline.

• Nod  given.  According  to  the  media  report,  Minister  of  Energy,  Green Technology  and  Water  Datuk  Seri  Dr  Maximus  Ongkili  and  Menteri Besar of Selangor Tan Sri Khalid Ibrahim  confirmed in a joint statement that  Puncak has agreed to Selangor State Government’s latest takeover offer  of  its  water  assets  and  operations.  The  offer  for  its  100%-owned Puncak  Niaga  SB  and  70%-owned  Syarikat  Bekalan  Air  Selangor (Syabas) is priced at MYR2.47bn and RM3.11bn respectively.
• Positive surprise. We are positive  on  this announcement as this  would prevent the triggering of  Section 114 of the Water Services Industry Act 2006,  which in our view  could complicate things further. Although there was  no official Bursa announcement and management has yet to revert to  our  queries,  we  believe  the  pricing  is  pegged  at  Selangor  State Government’s  latest  offer  tabled  on  28 Feb,  in  which  Puncak  is  set  to receive net proceeds amounting to MYR1.56bn.  
• Things that could go wrong.  Nonetheless, we caution that there could be  further  delays  on the takeover exercise  given that Gamuda’s (GAM MK,  BUY,  FV  MYR5.45)  40%-owned  Syarikat  Pengeluar  Air  Selangor (SPLASH) has yet to accept the offer. Note that the previous offer tabled by  the  Selangor  State  Government  for  Puncak  is  conditional  upon acceptance by the remaining water concessionaires, including SPLASH.
• Maintain  NEUTRAL.  Although  we  are  positive  on  this  latest development,  we  are  maintaining  our  NEUTRAL  call  with  our  SOPbased  FV  unchanged  at  MYR3.13,  pending  management’s  official confirmation and more clarity on the pricing and implementation timeline, especially in the event that  SPLASH pursues legal actions to request for higher compensation.

Source: RHB