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CIMB Research cuts Water sector to Neutral, downgrades Puncak

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CIMB Research cuts Water sector to Neutral, downgrades Puncak Empty CIMB Research cuts Water sector to Neutral, downgrades Puncak

Post by Cals Thu 13 Mar 2014, 17:08

CIMB Research cuts Water sector to Neutral, downgrades Puncak
Business & Markets 2014
Written by Jonathan Gan of theedgemalaysia.com   
Thursday, 13 March 2014 11:01

KUALA LUMPUR (Mar 13):  CIMB Research has cut its rating for the Water sector to Neutral (from Overweight) and downgraded Puncak Niaga Holdings Bhd to a Hold with a lower target price.
The downgrades come on the back of the invocation of the Water Services Industry Act 2006 (WASIA) by the Selangor State Government.
In a note today, CIMB Research analyst Sharizan Rosely said that while the development would be positive for water restructuring, concessionaires would lose out on the deal.
“The main issue is whether the concessionaires will be offered a fair exit price.”
“Although the constitution provides for a "fair compensation" in the event that assets are "nationalised", the above likely risks reduce the chances of an amicable takeover deal for water players, namely Puncak Niaga and Gamuda,” he said.
Sharizan has recommended investors to stay on the side lines, adding that the coming weeks will set the course of action for the failed takeover proposals.
In view of the current situation, Sharizan has downgraded Puncak to a Hold and cut his target price to RM3.31 from RM4.16.
However, he maintained his “Add” rating for Gamuda Bhd.  
“We downgrade Puncak but maintain our Add rating for Gamuda as Splash makes up less than 1% of its realisable net asset value,” he said.
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