PUNCAK (6807) - Puncak Niaga Holdings - Wait for the cash and go
Target RM3.75 (Stock Rating: ADD)
Puncak's FY14 core net profit was 2% above our forecast, deemed broadly in line, and 16% above consensus estimate. This could well be the last quarter before Puncak exits the water business. All eyes are on the 9 Mar timeline, the revised deadline for its RM1.6bn water deal with the Selangor State government. Amid fears that the water asset transfer issue between the State and Federal governments could derail the M&A, we are confident of the Federal government's aim of resolving it amicably. We keep our EPS forecasts but cut our SOP-based target price as we update the balance sheet items (20% discount). The stock could re-rate once the deal is finalised, which then brings investors closer to the RM1/share bumper payout (36% yield). Maintain Add.
FY14 broadly in line
FY14 core net profit was 2% above our full-year numbers and 16% above consensus. The overall performance was broadly in line, with all three divisions contributing to earnings growth. The absence of dividends was expected, but a potential board-approved windfall cash payout of RM1/share is likely in 2H15, if the water deal concludes by mid 2015.
Easier said than done in Selangor
There have been mixed views on the fate of the takeover of Puncak's water assets. Press reports quoted Pakatan Rakyat's Selangor water committee as saying that there could be another potential crisis emerging over the water restructuring in Selangor, due to a conflict between the Federal and State governments over the ownership/transfer of acquired water assets. But we take comfort from the Federal government's response saying that the 9 Mar deadline is within reach and both parties should be able to resolve the issue.
Windfall dividends still worth the wait
What remains firm is that Puncak is ready to exit the water business. We continue to view this positively as the deal will still translate to a bumper payout to shareholders. Regardless of whether there is greater visibility on the outlook on its remaining businesses following the water assets sale, investors should focus on the potential 36% dividend yield. Our revised SOP valuation of RM2.5bn translates to RM4.96/share (fully diluted), comprising RM2.92/share from the cash offer and RM1.77/share largely from the remaining business units, i.e. oil & gas (15x P/E) and construction (15x P/E).
Source: CIMB Daybreak - 27 February 2015
Target RM3.75 (Stock Rating: ADD)
Puncak's FY14 core net profit was 2% above our forecast, deemed broadly in line, and 16% above consensus estimate. This could well be the last quarter before Puncak exits the water business. All eyes are on the 9 Mar timeline, the revised deadline for its RM1.6bn water deal with the Selangor State government. Amid fears that the water asset transfer issue between the State and Federal governments could derail the M&A, we are confident of the Federal government's aim of resolving it amicably. We keep our EPS forecasts but cut our SOP-based target price as we update the balance sheet items (20% discount). The stock could re-rate once the deal is finalised, which then brings investors closer to the RM1/share bumper payout (36% yield). Maintain Add.
FY14 broadly in line
FY14 core net profit was 2% above our full-year numbers and 16% above consensus. The overall performance was broadly in line, with all three divisions contributing to earnings growth. The absence of dividends was expected, but a potential board-approved windfall cash payout of RM1/share is likely in 2H15, if the water deal concludes by mid 2015.
Easier said than done in Selangor
There have been mixed views on the fate of the takeover of Puncak's water assets. Press reports quoted Pakatan Rakyat's Selangor water committee as saying that there could be another potential crisis emerging over the water restructuring in Selangor, due to a conflict between the Federal and State governments over the ownership/transfer of acquired water assets. But we take comfort from the Federal government's response saying that the 9 Mar deadline is within reach and both parties should be able to resolve the issue.
Windfall dividends still worth the wait
What remains firm is that Puncak is ready to exit the water business. We continue to view this positively as the deal will still translate to a bumper payout to shareholders. Regardless of whether there is greater visibility on the outlook on its remaining businesses following the water assets sale, investors should focus on the potential 36% dividend yield. Our revised SOP valuation of RM2.5bn translates to RM4.96/share (fully diluted), comprising RM2.92/share from the cash offer and RM1.77/share largely from the remaining business units, i.e. oil & gas (15x P/E) and construction (15x P/E).
Source: CIMB Daybreak - 27 February 2015
