PETALING JAYA: While Gamuda Bhd’s revised offer for the remaining 70% stake in Kesas Holdings Bhd is fair, it remains to be seen if Perbadanan Kemajuan Negeri Selangor (PKNS) will accept the offer.
Maybank IB Research said Gamuda’s revised cash offer for the remaining stake in Kesas was fair to all parties.
The new offer translates into an equity value of RM1.4bil for 100% of Kesas, 4% below Maybank’s equity discounted cash flow of RM1.45bil for the concession.
“We think that the new offer is fair to all parties. The offer values Kesas at a trailing financial year 2013 till end March (FY3/13) price-to-book of 2.1 times and current year FY3/14 price-to-earnings ratio of 12.7 times based on our forecasts,” it said.
Despite just being marginally value enhancing for Gamuda for now, Maybank believes there is scope for value enhancing debt refinancing to lift valuations further.
The research house remains positive on the additional stake, as it would boost Gamuda’s recurring earnings base.
“We continue to believe the acquisition could lead to something bigger at Gamuda, with a business trust structure to potentially feature for its toll assets,” Maybank said.
On Monday, Gamuda said its offer price for PKNS’ 30% stake in Kesas had now been raised to RM420mil and for Permodalan Nasional Bhd’s (PNB) 20% to RM280mil.
In addition, Gamuda had revised the purchase consideration in relation to the offer accepted by Amcorp Properties Bhd on Dec 18 for its 20% from RM250mil to RM280mil.
The new offer values the highway operator at RM1.4bil. Kesas is the toll concessionaire for the 35km Shah Alam Expressway under a concession agreement that is valid until Aug 18, 2023.
Gamuda said it had also received an acceptance in principle from PNB in relation to the new offer.
Subsequently, along with the Amcorp and PNB stakes, Gamuda’s holding in Kesas has been raised to 70% from 30% previously.
Hong Leong Investment Bank Research (HLIB) said the higher offer was within its expectations, while MIDF Research said it was a fair cash value deal.
HLIB said based on the latest offer, Kesas had been valued at RM1.4bil, 5.5% higher than its RM1.3bil valuation for the highway.
“We believe that we have been conservative in our traffic/expenses assumption, and given the potential that the concession would most likely be extended by another five years to August 2028, we are of the view that the offer is fair and would be valuation accretive for Gamuda.”
Nevertheless, it said Gamuda may not receive PKNS’ acceptance of the deal.
“Given the sensitive political climate, we do not foresee PKNS accepting the latest offer. Hence, we are expecting Gamuda to end up with a 70% stake in Kesas.”
Meanwhile, MIDF believes the acquisition would contribute positively to Gamuda. It said the 70% stake it holds in Kesas would earn it about RM105mil in FY14 earnings.
This will translate into an estimated 9% increase from Gamuda’s current FY14 net profit forecast of RM647.8mil.
It added that an additional 20% Kesas stake from PNB would partly offset the shortfall in Syarikat Pengeluar Air Selangor Holdings Bhd’s (Splash) FY14 profit contribution by 45%.
Gamuda has a 40% stake in water treatment operator Splash.