Bursa Community
Would you like to react to this message? Create an account in a few clicks or log in to continue.
Bursa Community

Bursa Malaysia Stock Forum - Enriching You!


Analysis PKNS holding out for more value in Kesas?

Bursa Community :: Community News

Go down

Analysis PKNS holding out for more value in Kesas? Empty Analysis PKNS holding out for more value in Kesas?

Post by Cals Sat 11 Jan 2014, 01:33

Analysis PKNS holding out for more value in Kesas?
Business & Markets 2014
Written by Shalini Kumar of theedgemalaysia.com   
Friday, 10 January 2014 16:03

THE SELANGOR STATE DEVELOPMENT CORP’S (PKNS) reluctance to sell its 30% stake in Kesas Holdings Bhd to Gamuda Bhd could mean that it is holding out for the construction group to set up a business trust that will house its highway concession assets, including Kesas.

Gamuda had said previously that it was mulling such a corporate exercise as part of its plan to unlock the value of the interests it holds in various highway concessionaires.  

If Gamuda does inject Kesas along with its other highway assets into a business trust, the value of the 30% stake will further increase due to the more efficient tax structure under a business trust as well as market pricing for the asset. 

This is believed to be the state investment arm’s main commercial reason for holding out, apart from political considerations. 

In a recent note, Alliance Research’s Jeremy Goh said PKNS’ non-acceptance of Gamuda’s offer was within expectations. “The Selangor state government previously said that it would use PKNS’ stake in the various toll concessionaires to try and block any attempted toll rate hike,” he says.  

Nevertheless, the state government, which has been running a huge budget surplus, also appears to be in no rush to cash out from Kesas.

While PKNS is holding out, Gamuda, which already owns 30% of Kesas, recently obtained the nod to acquire 20% each in the highway concessionaire from Amcorp Properties Bhd (Amprop) and Permodalan Nasional Bhd (PNB), thereby increasing its stake to 70%. Gamuda had offered Amprop and PNB RM280 million each for their stakes, which essentially values the highway at RM1.4 billion.

Gamuda has a 45% stake in Lingkaran Trans Kota Holdings Bhd, which owns and operates Lebuhraya Damansara–Puchong; a 52% stake in Sistem Penyuraian Trafik KL Barat Holdings Bhd, which has the SPRINT highway; and a 50% stake in Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd, which operates the SMART Tunnel. 

The group has also teamed up with Mapex Infrastructure Pte Ltd to develop the Panargh-Palsit Expressway in India. 

This is not the first time PKNS has held out on selling its interest in one of its investments. Last year, the Selangor state body resisted the sale of its 30% interest in PJ Sentral Development Sdn Bhd to Nusa Gapurna Development Sdn Bhd. 

The RM729 million merger exercise between Nusa Gapurna and Malaysian Resources Corp Bhd (MRCB) would have seen the injection of Nusa Gapurna’s landbank and other assets, including a 70% stake in PJ Sentral Development (the developer of the PJ Sentral project in Petaling Jaya) into MRCB. 

It was reported at the time that Selangor Menteri Besar Tan Sri Khalid Ibrahim felt PKNS was getting the raw end of the deal, and had asked PKNS to launch a counter-offer to buy back the 70% stake in PJ Sentral to take over full control of the project. 

At the time, PKNS said the “drag-along” notice that was served by Nusa Gapurna should not be binding and that PKNS had the first right of refusal. The legal wrangling is still ongoing.

Back to Kesas, the value of the offer for the highway concessionaire of RM1.4 billion is about 11.7 times its sustainable toll receipts estimated at RM120 million per annum. The toll concession expires in 2023.

Gamuda will have to fork out RM560 million for the acquisition. It will also have to fully consolidate the RM485 million in debts and RM232 million in cash that Kesas has. With this, Alliance’s Goh estimates that the group’s net gearing will rise to 29.6% from 13.5% currently.

“Assuming a six-month contribution from Kesas in FY2014 (financial year ends July), our earnings estimate would be increased by 3.4%. Our FY2015-16 earnings forecast will be raised by 5.9% and 5.4%, respectively, with the full-year impact from the acquisition,” he says. 

Public Invest Research’s Tan Siang Hing says the deal could boost Gamuda’s recurring earnings in view of the group trying to dispose of its water assets. “In our estimates, Kesas is contributing circa RM30 million to 40 million net income to the group. All told, we estimate Gamuda’s FY2014F-16F earnings might increase by 5% to 6% but we are keeping our earnings estimates unchanged for now, pending the signing of the deal,” he said in a note. 

For FY2013, Gamuda posted a net profit of RM541.4 million on revenue of RM3.88 billion. In the first quarter ended Oct 31, its net profit was RM165.48 million, on the back of RM486.12 million in revenue. 

Most recently, it has been reported that Gamuda might be tying up with Malaysian Mining Corp Bhd (MMC) to jointly take over Keretapi Tanah Melayu Bhd in a deal worth more than RM5 billion. 

Gamuda and MMC have already teamed up in projects that include the underground works and as the project delivery partner for the Sungai Buloh-Kajang MRT line and the double-tracking railway project from Ipoh to Padang Besar. 


This story first appeared in The Edge Malaysia Weekly Edition, on January 06 - January 12, 2014.
Cals
Cals
Administrator
Administrator

Posts : 25277 Credits : 57721 Reputation : 1766
Male Join date : 2011-09-08
Location : global
Comments : “My plan of trading was sound enough and won oftener that it lost. If I had stuck to it I’️d have been right perhaps as often as seven out of ten times.”
Stock Exposure : Technical Analysis / Fundamental Analysis / Mental Analysis

Back to top Go down

Back to top

- Similar topics

Bursa Community :: Community News

 
Permissions in this forum:
You cannot reply to topics in this forum