Water Stocks Gamuda, Puncak, KPS fall after Cabinet decided to invoke WASIA

by **Cals** Wed 09 Apr 2014, 01:53

Water Stocks Gamuda, Puncak, KPS fall after Cabinet decided to invoke WASIA

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Tuesday, 08 April 2014 16:23

KUALA LUMPUR (Apr 8): Water-related stocks Gamuda Bhd, Puncak Niaga Holdings Bhd and Kumpulan Perangsang Selangor Bhd (KPS) fell today after the federal government said it will invoke Section 114 of the Water Services Industry Act (WASIA) to forcibly take over water assets in Selangor.
This invocation of the law, though the date of which has not been decided yet, will allow the government to take over the day-to-day operation of water treatment and supply in Selangor.
At 4.04 pm today, Gamuda fell 14 sen or 3% to RM4.48 while Puncak Niaga lost 6 sen or 2% to RM2.88. The stocks saw trades of some 10.4 million shares and 858,000 shares respectively.
KPS also declined 2 sen or 1.3% to RM1.50. The stock saw 969,800 shares change hands.
Analysts said they viewed negatively the invocation of WASIA.
According to Deutsche Bank, the impact is ‘far-reaching’ as it is likely to shatter investor confidence and create unnecessary jitters in the capital markets.
“We maintain our view that any forced acquisition of assets is unprecedented and undermines the sanctity of contracts,” said analyst Chia Aun-Ling.
Analyst Danny Goh from Credit Suisse concurred, saying the negative impact on capital markets could raise cost of future projects.
“We fear it will raise the future re-financing cost for some RM430 billion infrastructure concession-related bonds and funding cost for future mega projects,” he said, noting that there could be implications for the KL-Singapore high speed rail project.
“It will also erode equity value of listed infrastructure assets.”
Deutsche Bank’s Chia, however, maintained a ‘buy’ rating for Gamuda with target price (TP) of RM5.25.
CIMB Investment Bank Research’s analyst Sharizan Rosely said he is maintaining ‘neutral’ on Gamuda, but added investors should ‘stay on the sidelines’.
“While Section 114 of the WASIA only transfers the management and administrative authority to the federal government (not the ownership of assets), a forced acquisition of the assets as is widely perceived as unlikely,” Sharizan said.