EPF buys 32% stake in Cheras-Kajang Highway from Taliworks

by **Cals** Tue 12 Aug 2014, 22:55

Business & Markets 2014

Written by Adrian Wong of theedgemalaysia.com

Tuesday, 12 August 2014 09:41

KUALA LUMPUR: The Employees Provident Fund (EPF) is acquiring from Taliworks Corp Bhd a 31.85% indirect stake in Cerah Sama Sdn Bhd, which owns Grand Saga Sdn Bhd — the concession holder of the 11.5km Cheras-Kajang Highway, for RM68.68 million cash.

This will reduce Taliworks’ stake in Cerah Sama from 55% to 23.15%. The other shareholder of Cerah Sama is Singapore-based South East Asian Strategic Asset Funds LP.

Taliworks, via its 84.62%-owned subsidiary Pinggiran Muhibbah Sdn Bhd, yesterday signed a share sale and purchase agreement (SSPA) with the EPF to dispose of its 100% equity interest in Pinggiran Ventures Sdn Bhd for RM68.68 million. Pinggiran Ventures owns a 49% equity interest in Pinggiran Infrastructure Sdn Bhd.

Taliworks’ original cost of investment of 55% of Cerah Sama in 2007 was RM55 million.

“The SSPA sets out the basis for Taliworks to partner with the EPF on a 51%:49% basis in a new special purpose joint venture (JV) vehicle [called] Pinggiran Infrastructure. Pinggiran Infrastructure’s seed asset is a 65% effective equity interest in Cerah Sama,” said the EPF and Taliworks in a joint statement yesterday.

For the financial year ended Dec 31, 2013, the Cerah Sama group audited net assets of RM228.4 million while it recorded a net profit of RM18.3 million.

Pursuant to the SSPA, the EPF and Taliworks entered into a shareholders agreement to set out Pinggiran Infrastructure’s strategic objectives, focus and their mutual rights, duties, liabilities and obligations to each other. The JV will target operating infrastructure projects and regulated businesses.

EPF deputy chief executive officer (investment) Mohamad Nasir Ab Latif said the investment is in line with the fund’s objectives of growing “mature infrastructure assets which have strong predictable cash flows”.

To facilitate this transaction, Taliworks on Aug 8, 2014 announced that it had reorganised some of the subsidiaries and JV companies in its toll road division.

“The board of directors of Taliworks, having considered all aspects of the JV with the EPF, is of the opinion that it is in the mutual interest of both parties. We are excited about the prospects of our Pinggiran Infrastructure JV, having seeded it with our effective 65% interest in our toll road division, Cerah Sama, and the partnership with the EPF,” Taliworks executive director Lim Yew Boon said in the statement.

“We expect it to contribute positively to the growth and earnings of the company going forward,” he added.

In a filing with Bursa Malaysia yesterday, Taliworks said the proceeds from the SSPA will be earmarked for growing Pinggiran Infrastructure.

“The board believes that Pinggiran Infrastructure will be the new growth engine for Taliworks. Moving forward, Pinggiran Infrastructure will be targeting the acquisitions of operating infrastructure assets with ‘predictable cash flows’,” it said.

After hovering in a range of between RM1.05 and RM1.25 since the beginning of the year, Taliworks shares began rising on Aug 4 before peaking at RM1.43 last Friday — an increase of 23.3% and the highest price attained by the stock since since Jan 11, 2011.

For the second quarter ended June 30, 2014, Taliworks recorded a net profit of RM12.69 million, an increase of 32.2% from RM9.6 million, while revenue rose nearly 4% to RM81.8 million from RM78.7 million in the same period last year.

The stock closed down 0.3 sen sen or 2.11% to RM1.39 yesterday, bringing its market capitalisation to RM606.72 million.

This article first appeared in The Edge Financial Daily, on August 12, 2014.