EPF seeks deals with Taliworks

  • Business
  • Wednesday, 11 May 2016

PETALING JAYA: The Employees Provident Fund (EPF) is not opposed to taking up an equity stake in infrastructure company Taliworks Corp Bhd, especially if the calculation and valuations are right and fitting to what the EPF is looking for, says EPF deputy chief executive officer (investment) Datuk Mohamad Nasir Ab Latif.

“The EPF is more than happy to look into more investments with Taliworks on assets if there are good opportunities that provide matured and healthy cash-generating returns,” said Mohamad Nasir.

The EPF currently has an indirect 1.7% stake in the company, according to Bloomberg data.

Mohamad Nasir was speaking to reporters during the press conference after Taliworks’ EGM, in which shareholders voted in favour of its new 35% acquisition in SWM Environment Holdings Sdn Bhd (SWMH) for RM245mil.

The EPF also has a 35% stake in SWMH, which it had acquired since December 2015. This is the EPF’s first asset acquisition in the waste management space.

“While this is our first waste management asset, we buy an asset more for its stable cashflow and strong regulatory framework rather than the sector per se,” said Mohamad Nasir.

Taliworks executive director Datuk Ronnie Lim Yew Boon believes that this valuable partnership with the EPF will continue to drive the momentum of the merger and acquisition business expansion model of Taliworks.

“Jointly, we will continue to target strategic assets that will generate immediate cashflow and earnings accretion to both entities, which will ultimately support Taliworks’ dividend policy,” said Lim in his speech.

SWMH marks the third joint-investment between Taliworks and the EPF. The concession tenure for SWMH is until Aug 31, 2033.

This acquisition is expected to result in immediate earnings accretion for Taliworks as SWMH has a mature and profitable business. Taliworks said in a release that there was immediate visibility to generate a minimum of 6% dividend payout on the purchase consideration of RM245mil without any impact on group gearing.

Taliworks has two other existing partnerships with the EPF.

The EPF’s first venture with Taliworks was back in 2014 when it acquired a 49% stake in Cerah Sama Sdn Bhd, which, in turn, is a holding company for Grand Saga Sdn Bhd, the concession holder of the 11.5-km Cheras-Kajang Highway. The pension fund paid nearly RM69mil for the stake. The concession tenure is until September 2045.

The second joint venture was in 2015 when the EPF paid Taliworks RM66.5mil for a 37.5% stake in Grand Sepadu Sdn Bhd, the concession holder of the New North Klang Straits Bypass Expressway or NNKSB. The concession tenure is until December 2032.

Meanwhile, Taliworks is confident that it can continue to pay good dividends and match the eight-sen dividend it paid last year.

Taliworks has a dividend policy of paying out 75% of its net consolidated net profit. However, it exceeded this last year when it paid a total of eight sen in dividends, bringing total dividends paid during the financial year to RM67.94mil.

Last year, Taliworks made a net profit of RM91.6mil on the back of RM410.9mil in revenue.

Taliworks’ chief investment officer Kevin Chin Soong Jin explained that if one were to look at Taliworks’ net cash flow from operations, the amount of RM189.83mil already exceeded the accounting profit.

“Taliworks has ample retained earnings to make the dividend payments,” said Chin.

Taliworks is an established pure-play infrastructure company engaged in water treatment, highway and toll management, waste and wastewater management

During its EGM, the company also received shareholders’ approval for the proposed disposal of its entire China waste and waste water management businesses for US$54.6mil (RM221.6mil).

The disposal will reduce Taliworks’ gearing from 0.64 times to 0.36 times and will result in an approximate one-off gain of RM62.9mil.

“The proposed disposal of its entire China businesses will relieve Taliworks from imminent commitments to fund substantial foreign currency upgrading capital expenditure and enable the company to redirect the disposal proceeds to other mature business investments as part of its new focus,” said Taliworks in a press release.

Taliworks’ new business strategy is to focus its portfolio of investments on mature operational cash-generating utilities or infrastructure businesses in Malaysia and the developed markets and when appropriate to partner with the EPF.

“Taliworks aims to expand and strengthen its recurring earnings and cash-flow streams from long-term concessions to sustain its dividend payout policy. The company foresees more collaboration opportunities with the EPF in the future,” it said.

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