Thursday 28 Mar 2024
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KUALA LUMPUR (November 12): Puncak Niaga Holdings Bhd saw an 8.4% jump in its share price after it announced the disposal of its water assets, in line with analysts recommendation that investors accumulate the stock based on its high-yield special dividends post-divestment.

At 11.40am, Puncak Niaga was traded at RM3.63, up 16 sen or 4.6%, with some 2.80 million shares done.

The counter earlier increased as much as 29 sen or 8.4% to a high of RM3.74, placing itself among the top gainers on the exchange.

Its warrant PUNCAK-WB was also among top gainers, adding 16 sen or 6.6% to RM2.59.

In an announcement yesterday, the group said it had signed a conditional sale and purchase agreement (SPA) with Pengurusan Air Selangor Sdn Bhd (PASSB), a wholly-owned subsidiary of state investment arm Kumpulan Darul Ehsan Bhd (KDEB).

For RM1.55 billion in cash, Puncak Niaga has agreed to part with its wholly-owned subsidiary Puncak Niaga (M) Sdn Bhd (PNSB) and the water treatment operator’s cumulative convertible redeemable preference shares; a 70% stake in loss-making water distributor Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), and its RM212 million nominal value of redeemable convertible unsecured loan stocks.

In response to the development, analysts have recommended investors to accumulate the stock, in view of the special dividends arising from the disposal.

CIMB Investment Bank Bhd said that the group has set aside RM534 million from the proceeds of the sale to be distributed as special dividends to shareholders, translating to special dividend of RM1.00 per share.

“A positive surprise was the generous RM1.00 per share in special dividends (fully diluted) versus our expectations of 20 sen to 30 sen per share,” it said in a note today.

Meanwhile, CIMB said the balance of the proceeds of RM1 billion would allow the group to pursue the expansion of its oil and gas (O&G) segment beyond its current transport and installation (T&I) contract from Petronas.

The research house noted that Puncak Niaga’s profit will feature mainly its domestic O&G venture and construction segment, after the divestment has been completed.

“Accumulate in view of the board-approved special dividends, which translate to an attractive dividend yield of 29% and likely to be realised in FY15 as the deal should be wrapped up in 1Q15,” CIMB said.

The research house maintained “add” on Puncak Niaga, with an unchanged target price of RM4.28.

Similarly, AmResearch Sdn Bhd has advised shareholders to accumulate Puncak Niaga’s shares following the disposal.

“We advise shareholders to accumulate to enjoy the dividend windfall of RM1.29 per share (or RM1.00 per share based on the fully-diluted shares of 534.6mil),” wrote AmResearch.

However, the research house highlighted that Puncak Niaga may be classified as a cash company after the divestment of its water segment and trigger Practice Note 17 given that water treatment and supply is a core business for the group.

“Hence, we maintain our "hold" call on Puncak until we see further clarity on the group’s future business plans,” said the research house. It maintained a fair value of RM3.40 on the stock.

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