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!


Higher offer price for Gamuda’s Splash?

Bursa Community :: Community News

Go down

Higher offer price for Gamuda’s Splash? Empty Higher offer price for Gamuda’s Splash?

Post by Cals Mon 13 Jan 2014, 18:18

Higher offer price for Gamuda’s Splash?
Business & Markets 2014
Written by Alliance IB Research   
Monday, 13 January 2014 10:01

Gamuda Bhd
(Jan 10, RM4.52)
Maintain buy at RM4.53 with a target price of RM5.50: The four water concessionaires in Selangor, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Puncak Niaga (M) Sdn Bhd (PNSB), Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) and Konsortium Abass Sdn Bhd, have received a letter from Kumpulan Darul Ehsan Bhd (KDEB) stating that there will be no further discussions on the proposed acquisition of their water assets in Selangor for the foreseeable future.

The talks were halted in view of the fact that the Selangor government is agreeable to the federal government exercising its rights and power under Section 114 of the Water Services Industry Act 2006 to acquire the water assets of the four concessionaires.

This decision by the state government (to halt negotiations) is subject to the condition that the National Water Services Commission appoints two administrators to represent the state. The two are KDEB president Suhaimi Kamaralzaman and Menteri Besar Inc CEO Faekah Husin.

This move by the Selangor government is not entirely surprising as the state had made five previous offers to acquire the water assets of the four concessionaries, all of which were in vain.

“We believe that the main cause of the failure is the result of unrealistic expectations among water concession companies’ shareholders in respect of the tangible value of their equity holdings in these companies,” Selangor Menteri Besar Tan Sri Khalid Ibrahim was reported as saying.

With the federal government now involved in the takeover, we think there is a glimmer of light to this long-drawn water saga. With some of the major shareholders in some of the concessionaires viewed as “friendly parties” to the federal government, we reckon that it will now be easier to find an amicable solution.

In the last offer, the only concessionaire that accepted the deal was Konsortium Abass. But its acceptance was deemed void as the deal had to be unanimously accepted by all the parties concerned.

Splash, one of the concessionaires, is a 40% associate of Gamuda. The last offer for Splash of RM1,834.6 million was rejected on the grounds that: (i) a key component in the previous offer was removed; (ii) the valuation method was unfair; and (iii) the status of its operation and maintenance operators was uncertain. 
[You must be registered and logged in to see this image.]
With the federal government now involved, we reckon that a higher offer price could be on the cards. Our valuation for Splash continues to be based on the last offer price.

There is no impact to our earnings for now as we have not imputed the sale of Splash into our forecast.

We maintain our “buy” rating on Gamuda with an unchanged RM5.50 target price based on sum-of-parts valuation. This implies financial year 2014 ending July 31 (FY14) and FY15 price-earnings ratio of 18 times and 15.6 times respectively. — Alliance IB Research, Jan 10


This article first appeared in The Edge Financial Daily, on January 13, 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