Gamuda’s revised offer for PNB's Kesas stake “fair”, says MIDF

by **Cals** Sat 21 Jun 2014, 03:50

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Friday, 20 June 2014 11:29

KUALA LUMPUR (June 20): MIDF Research deemed Gamuda Bhd’s revised cash offer of RM290 million for Permodalan Nasional Bhd’s (PNB) 20% stake in Kesas Holdings Bhd as “fair”.

Initially, Gamuda had offered RM280 million for the PNB’s stake in Kesas, but the offer lapsed following failure of PNB and Gamuda to execute a definitive agreement.

“In our opinion, the revised offer is fair, considering that Gamuda’s new implicit valuation of RM1.45b (from RM1.4b) for 100% of Kesas is still a discount of 8.5% to our computed discounted cash flow (DCF) valuation of RM1.6b,” wrote MIDF in a note today.

Gamuda announced yesterday that it had entered into a share purchase agreement (SPA) with PNB for the acquisition of the 20% stake.

With the completion of the acquisition, Gamuda’s stake in Kesas will increase to 70% from 50%.

“Gamuda’s 70% stake in Kesas will earn it approximately RM105m in FY14 earnings. This will translate into an estimated 9% increase from the current Gamuda’s FY14 net profit forecast of RM647.8m.

“The additional 20% Kesas stake from PNB will contribute RM30m to the bottomline and will partly offset the shortfall in Splash’s FY14 profit contribution of about 30%-40%,” said the research house.

MIDF maintained “neutral” on Gamuda with an unchanged TP of RM4.88.

The research house continues to like Gamuda based on its strong unbilled sales of RM1.7 billion, its recurring income from Kesas, and as Gamuda is the front-runner for multi-billion railway infrastructure jobs.