KUALA LUMPUR (Aug 6): While the market this morning responded somewhat negatively to the potential sale of Syarikat Pengeluar Air Sungai Sdn Bhd (SPLASH) to Selangor's state at an offer price of RM2.55 billion cash as seen by the decline in share prices for Kumpulan Perangsang Selangor Bhd (KPS) and Gamuda Bhd, CIMB Research believes that KPS shareholders could benefit from a potential special dividend.

In a note Aug 5, CIMB analysts, Sharizan Rosely and Kamarul Anwar, pointed out that the takeover offer shows that total cash proceeds from KPS's 30% stake in SPLASH works out to RM765 million or RM1.42 per share, which is equivalent to 75% of its market capitalisation of RM1 billion.

"The RM570 million upfront cash portion from the sale of SPLASH would increase end-1Q18 cash of RM82 million by a whopping seven times to RM652 million. While the impact on earnings excluding the 30% share of SPLASH's net profit and the potential impairment is significant, we believe this is likely to be mitigated by a potential special dividend," they said in their note.

It added that the sensitivity analysis ran by CIMB research suggested a hypothetical special dividend yield of 3% to 17% if between 5% and 30% of the RM570 million upfront sale proceeds were paid as special dividends, and a whopping 28% dividend yield if 50% of cash were paid as a bumper special dividend.

Both Sharizan and Kamarul also noted that the development is not a loss to KPS, as the group can now be fully focused on executing its business transformation plan to unlock the full potential of its core businesses, thus creating long-term value and generating sustainable returns for the group.

As of writing, KPS's share price had fallen by 5.26% or 10 sen to RM1.80 with about 12.1 million shares traded, giving it a market capitalisation of about RM972.3 million.