Gamuda may end up with only 50% of Kesas

by **Cals** Wed 12 Feb 2014, 08:38

Published: Wednesday February 12, 2014 MYT 12:00:00 AM
Updated: Wednesday February 12, 2014 MYT 6:43:09 AM
Gamuda may end up with only 50% of Kesas

PETALING JAYA: Construction firm Gamuda Bhd may end up with just the 50% stake in Kesas Holdings Bhd, the operator of the Kesas highway, after failing to acquire the stakes held by Selangor State Development Corp (PKNS) andPemodalan Nasional Bhd (PNB).
The company hit a hurdle in acquiring PNB’s 20% stake for RM280mil in the highway operator after failing to execute any definitive agreement with the government-owned asset manager.
To-date, only Amcorp Properties Bhd has agreed to sell its 20% stake. PKNS, which has a 30% stake, had rejected the offer.
Gamuda owns the remaining stake.
Analysts remain divided over whether Gamuda would make a higher offer for the PNB stake with Kenanga Investment Bank Bhd analyst Iqbal Zainal not ruling out the possibility of a higher valuation for PNB’s stake.
“As of now, assuming Gamuda will only own 50% of the highway; we expect its earnings to be boosted by additional RM24mil to RM32mil on a recurring basis.
“We will likely revise higher our financial year 2014 and financial year 2015 earnings estimates by 4.0% and 4.2% once Gamuda inked a definitive agreement with Amcorp,” he said.
On the positive side, Iqbal noted that Gamuda’s gearing level would not be impacted since the company would not have to consolidate the highway operator’s balance sheet into its books.
On the other hand, Public Investment Bank Bhd analyst Tan Siang Hing believes that further revisions to the offer may be limited as the revised offer of RM1.4bil (made on Dec 23) “is a fair one”.
The revised offer was 12% above the original offer made on Nov 4.
Tan said details for any revision to the offer were still scarce, adding that the current offer valued the highway operator at 11.7 times the estimated annual toll receipts of RM120mil.
Most research houses took the recent development as a negative surprise as the deal would have been both earnings and valuation accretive for Gamuda.
“We believe that Gamuda will now be focused on completing the acquisition of Amcorp’s 20% stake in the Kesas Highway before resuming negotiations for PNB and PKNS stake.
Although Gamuda may eventually succeed in acquiring PNB’s stake, we do not foresee PKNS accepting Gamuda’s offer given the current political climate,” saidHong Leong Investment Bank Bhd analyst Jarod Soon.