EPU working out solution for Gamuda to resolve impasse

KUALA LUMPUR: The Economic Planning Unit (EPU) is believed to be working out a solution for Gamuda Bhd to resolve its deadlock with the Selangor state government over the acquisition of the company's water assets.

UOB Kay Hian Malaysia Research said on Thursday based on its channel checks, "we understand the EPU is drafting out a solution which would be amicable for Gamuda to accept".

The research house believed investors should now look at the resolution of the water issue from Gamuda's standpoint.

UOB Kay Hian Research said to recap, Gamuda rejected Selangor's last offer made in November 2013 as it would only value Gamuda's water assets at 10% of its net asset value of RM2.5b.

"If Gamuda had accepted the previous offer, it would have to book a loss of about RM920mil," it said.

The research house issued the report after Puncak Niaga Holdings resolved to accept Selangor's offer to acquire its water concession assets, which it described as a positive surprise to the market.

"Going forward, we expect full resolution of the long-drawn water saga, smooth progress in the construction of the Langat 2 treatment plant as well potentially positive news for Gamuda's associate Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH).

To recap, Puncak Niaga Holdings announced it was accepting Kumpulan Darul Ehsan Bhd's (KDEB) offer to acquire 100% of Puncak Niaga (M) Sdn Bhd (PNSB) and 70% of Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS) for a total net cash of RM1.56bil.

Under the deal, the takeover of PNSB and SYABAS would include the takeover of all assets and liabilities of PNSB in relation to its concession usiness only. KDEB would also return all non-concession liabilities, assets and businesses of PNSB.

However, the acceptance is subject to the due diligence inquiry being satisfactory to KDEB, Puncak and Pengurusan Aset Air Bhd (PAAB).

UOB Kay Hian Research maintained its Buy call on Gamuda and target price of RM5.54, which implied a 15.9 times fully diluted FY15F price-to-earnings (PE).

"We believe Gamuda's prospects remain bright, given key catalysts as it could again be the PDP and prospective winner of the underground tunnelling works for MRT Line 2. Also, we like Puncak Niaga as its net cash proceeds would exceed its market cap and also excludes valuation from its oil & gas division," it said.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Next In Business News

Pharmaniaga appointed sole distributor of Baraka in Malaysia
FBM KLCI likely to trade higher next week
Aramco agrees US$12.4bil deal to sell stake in pipelines
Solar in Malaysia - Challenges, and too much of a good thing?
CPO futures to see volatile trading next week, eyes on MPOB data
Pfizer, BioNTech seek US emergency nod for COVID-19 vaccine in adolescents
Eyes on next generation as Singapore succession is thrown into question
Oil price falls, ends week about 2% lower on supply increase, new lockdowns
BlackRock, Mustier's blank-check firm eye Credit Suisse fund management arm
GLOBAL MARKETS-S&P 500, Dow scale new heights, Treasury yields rise on strong inflation data

Stories You'll Enjoy