This article first appeared in The Edge Financial Daily, on October 19, 2015.

Puncak Niaga Holdings Bhd
Oct 16 (RM2.85)
Maintain hold with a fair value of RM2.80: The water sale has been completed. Puncak Niaga announced last Thursday that it had received the balance purchase price of RM1.55 million (of a total RM1.5 billion) from Pengurusan Air Selangor Sdn Bhd. As such, the proposed disposal has been completed.

Accordingly, Puncak Niaga (M) Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd will cease to be a subsidiary and joint-venture company of Puncak Niaga respectively.

The announcement marks a milestone in the state’s water restructuring exercise, following seven years of impasse. Only the acquisition of Syarikat Pengeluar Air Sungai Selangor Sdn Bhd remains in completing the exercise in Selangor.

Following this, Puncak Niaga is expected to deliver a cash dividend of RM534 million (or RM1 per share on a fully diluted basis) to shareholders by year end (or latest in the first quarter of 2016).

Meanwhile, Puncak Niaga has earmarked the remaining of the proceeds (around RM1 billion) for either oil and gas (O&G) or oil palm plantation ventures. With the proceeds in hand, we expect the group to actively seek new opportunities in the coming months.

Puncak Niaga’s next move will be crucial in order to fill the earnings gap, following the sale of its water concessionaire businesses. For the six-month period, its O&G division posted a loss of RM20 million, while its water construction arm made a profit of RM2 million.

Positively, Bursa Malaysia said Puncak Niaga would not be considered as a cash company pursuant to Practice Note 16 of the Main Market listing requirements.

Our “hold” call remains as we await Puncak Niaga’s next move beyond the dividend payout. — AmResearch, Oct 16