Puncak Niaga has received the full proceeds of MYR1.55bn from Pengurusan Air Selangor for the disposal of its water-related assets and operations – this officially marks an end to the water saga after eight years of negotiations. Maintain BUY with our fully-diluted SOPbased TP unchanged at MYR3.25 (13% upside). We expect the group to pay out a special DPS of minimum MYR1 by 1Q16.

Salient details. Puncak Niaga confirmed on Bursa Malaysia that it has received the MYR1.55bn net proceeds from Pengurusan Air SelangorSB for the disposal of its 100% interests in Puncak Niaga SB and 70% stake in Syarikat Bekalan Air Selangor SB. This comes within our expectations and marks an official conclusion to the disposal of its waterrelated assets and operations after eight years of protracted negotiations.

Bumper dividend. The net proceeds of MYR1.55bn translate into a hefty MYR3.72/share based on Puncak Niaga’s existing 418m share base. That said, we expect progressive conversion of its outstanding warrants and convertible sukuk ijarah into ordinary shares to be entitled for the special DPS. Recall that management had previously committed to paying out a special DPS of minimum MYR1. If the group were to fully distribute the cash proceeds to its existing shareholders, this would imply a special DPS of MYR2.91 based on its fully-enlarged share base of 534.6m. We expect the quantum of the special DPS to be confirmed in 1Q16, with physical payments to take place thereafter.

Forecasts revision. Now that the proposed disposal has been completed, we are removing the water-related earnings contribution from our model. We expect Puncak Niaga to close in the red for FY15 amidstthe oil & gas industry’s headwinds following the slump in crude oil prices.We believe the group would return into the black by FY16, as we gathered that management is implementing various costs-cutting measures to help boost profitability over the medium term.

Maintain BUY. All in, we are glad that the takeover of Puncak Niaga’s water assets and operations by the Federal and Selangor State Governments has finally come to an end. As such, we are maintaining our BUY call, with our SOP-based TP unchanged at MYR3.25.