Puncak Niaga Holdings - A generous 29% dividend yield
Target RM4.28 (Stock Rating: ADD)
Puncak Niaga is close to realising the Selangor state government’s RM1.6bn cash offer for both its water assets. Yesterday's conditional sale and purchase agreement (SPA) formalised the deal and the agreed valuations for PNSB and Syabas. A positive surprise was the board-approved RM1/share special dividend spin-off to be distributed to shareholders next year: a 29% dividend yield. The asset divestment is expected to be completed in two months and will leave Puncak with sufficient cash to execute its oil & gas expansion plans. We retain our target price as our SOP has incorporated the offer price. Maintain Add. Formalisation of the SPA and confirmation of special dividends are key potential re-rating catalysts. Puncak remains our top pick in the water sector.
What Happened
Puncak Niaga has formalised a sale and purchase agreement (SPA) for the divestment of its two water concessions. The RM1.6bn cash offer by the Selangor state government is unchanged. The group has set aside RM534m from the total proceeds to be distributed to shareholders as special dividends. The deal is expected to be completed in 60 days (two months) from the SPA.
What We Think
The valuation principles, including the terms and conditions of the state government's offer, are consistent with the earlier offer. A positive surprise was the generous RM1/share in special dividends (fully diluted) versus our expectations of 20-30 sen/share. With a balance cash proceeds of c.RM1bn, this deal is also positive for Puncak Niaga as it would allow the group to pursue the expansion of its oil & gas business via M&As, domestically and overseas, and beyond the existing transport and installation (T&I) contract from Petronas. Surplus cash has also been earmarked for working capital needs of its water infra construction segment. Post-water asset divestment, Puncak's profit will feature mainly its domestic oil & gas venture and the construction segment. This excludes the proforma RM415m gain from the disposal of the water assets. We maintain our EPS forecasts pending the completion of the deal.
What You Should Do
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. The share price has declined 8% from its 52-week high of RM3.71 in late-Jun as investors were generally concerned about the implications of the political change in Selangor and the potential delays in the water takeover deal.
Source: CIMB Daybreak - 12 November 2014
Target RM4.28 (Stock Rating: ADD)
Puncak Niaga is close to realising the Selangor state government’s RM1.6bn cash offer for both its water assets. Yesterday's conditional sale and purchase agreement (SPA) formalised the deal and the agreed valuations for PNSB and Syabas. A positive surprise was the board-approved RM1/share special dividend spin-off to be distributed to shareholders next year: a 29% dividend yield. The asset divestment is expected to be completed in two months and will leave Puncak with sufficient cash to execute its oil & gas expansion plans. We retain our target price as our SOP has incorporated the offer price. Maintain Add. Formalisation of the SPA and confirmation of special dividends are key potential re-rating catalysts. Puncak remains our top pick in the water sector.
What Happened
Puncak Niaga has formalised a sale and purchase agreement (SPA) for the divestment of its two water concessions. The RM1.6bn cash offer by the Selangor state government is unchanged. The group has set aside RM534m from the total proceeds to be distributed to shareholders as special dividends. The deal is expected to be completed in 60 days (two months) from the SPA.
What We Think
The valuation principles, including the terms and conditions of the state government's offer, are consistent with the earlier offer. A positive surprise was the generous RM1/share in special dividends (fully diluted) versus our expectations of 20-30 sen/share. With a balance cash proceeds of c.RM1bn, this deal is also positive for Puncak Niaga as it would allow the group to pursue the expansion of its oil & gas business via M&As, domestically and overseas, and beyond the existing transport and installation (T&I) contract from Petronas. Surplus cash has also been earmarked for working capital needs of its water infra construction segment. Post-water asset divestment, Puncak's profit will feature mainly its domestic oil & gas venture and the construction segment. This excludes the proforma RM415m gain from the disposal of the water assets. We maintain our EPS forecasts pending the completion of the deal.
What You Should Do
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. The share price has declined 8% from its 52-week high of RM3.71 in late-Jun as investors were generally concerned about the implications of the political change in Selangor and the potential delays in the water takeover deal.
Source: CIMB Daybreak - 12 November 2014
