Puncak  Niaga’s  1HFY14  net  profit  of  MYR106.4m  came  in  within  our expectations but fell short of consensus estimate at 50.7% and 41.0% of the respective full-year estimates. We make no changes to our earnings forecasts at this juncture. We maintain our TRADING BUY call and fully diluted SOP-based FV  of  MYR4.01,  as we remain hopeful that the long awaited proposed consolidation of the Selangor state’s water industry is around the corner.

Largely in line.  Puncak Niaga’s  (Puncak)  1HFY14  revenue shed  11.9% y-o-y to MYR457.2m, dragged down by lower contribution from its oil and gas  (O&G)  division  following  Petronas’  decision  to  defer  most  of  its works  to  2QFY14.  PBT  sank  by  a  larger  17.1%  y-o-y  to  MYR134.0m,due to lower profitability margin from  its water segment on higher opex incurred.  That said,  1HFY14  core earnings  of  MYR106.4m  (-12.8% y-oy) came in within our expectations but fell short of consensus estimate at 50.7%  and  41.0%  of  the  respective  full-year  estimates.  2QFY14 numbers  were  generally  weaker  y-o-y  but  improved  sequentially  on better showing from its O&G arm following the resumption of its contract works with Petronas.

Forecasts and risks. With the results coming in largely in line, we leave our FY14-15F forecasts unchanged for now and  take the opportunity to introduce our FY16F estimate. We note that our earnings projections are at 19.1-45.9% discounts to consensus estimates. This is due to our more conservative approach  with respect to  earnings accretion  from its O&G arm,  as we  do not discount the possibility of  a further deferment of  its MYR1.8bn  Pan Malaysia  integrated  offshore  installation  contract, which was awarded by Petronas back in Dec 2013.

Maintain  TRADING BUY. We maintain  our TRADING BUY call with our fully-diluted  SOP-based  FV  unchanged  at  MYR4.01.  Although  the ongoing  political  uncertainty  in  the  Selangor  state  has  sparked  some selling  pressure  over  the  past  4-6  weeks,  we  remain  hopeful  that  the long-awaited  proposed  consolidation  of  the  Selangor  state’s  water industry is around the corner  now that Puncak has principally agreed to the latest takeover offer of MYR1.56bn.

Source: RHB