- Starbiz reported today that the Selangor government is
unlikely to revise its offer to take over SPLASH as it would be unfair
to the other concessionaires that had accepted the offer.
- The report quoted Azrul Azwar, a special functions officer for chief minister Tan Sri Khalid Ibrahim, as saying that the 12% non-compounded return per annum since 2000 is “decent”.
- Recall that Gamuda Bhd, which owns a 40% stake in SPLASH, had noted that the RM250.6mil offer was less than 10% of SPLASH’ s NAV of RM2.54bil. As such, this would result in a divestment loss of RM920mil for Gamuda.
- In response, Azrul said the RM250.5mil offer was arrived after applying a noncompounding 12% ROE invested up to Dec 31,2012 and after the deductions of RM725.4mil in past dividend payouts.
- The amount of RM976mil was arrived based on a 12% non-compounded return for SPLASH’s shareholders’ initial investments of RM400mil (via RM50mil in ordinary shares and RM350mil in redeemable preference shares) since 2000. He added that the historical dividends of RM725.4mil were more than enough for SPLASH to recover their investments.
- He claimed that SPLASH had enjoyed lucrative returns with a profit of RM382mil and a pretax margin of 93.47% for FY13 ended March. In addition, he noted that SPLASH enjoys synergistic benefits as Gamuda Water Sdn Bhd (80%-owned by Gamuda, 20% by Sweet Water Alliance Sdn Bhd) holds the operation and maintenance (O&M) licence for the Sungai Selangor Phase 3.
- Recall that state had previously said the privatisations of the other concessionaires will still go through and do not depend on SPLASH’s acceptance. Nevertheless, SPLASH’s acceptance is still needed for an ultimate closure for the water saga.
- As such, we think that a fair valuation for SPLASH is still key to push the water impasse to a final resolution. In May, there have been indications by the state and Federal governments to re-examine bulk water supply payment to SPLASH. The continuation of the O&M licence is also a key point in negotiations.
- Note that the previous water assets in the other states were concluded at 1x book value. We have a BUY for Gamuda (Fair value: RM5.25/share), which reflects a 10% discount to Splash’s net book value of ~RM2.5bil as at end-Dec 2013. We maintain HOLD on Puncak Niaga, with a fair value of RM3.40/share. Maintain NEUTRAL.
Source: AmeSecurities
- The report quoted Azrul Azwar, a special functions officer for chief minister Tan Sri Khalid Ibrahim, as saying that the 12% non-compounded return per annum since 2000 is “decent”.
- Recall that Gamuda Bhd, which owns a 40% stake in SPLASH, had noted that the RM250.6mil offer was less than 10% of SPLASH’ s NAV of RM2.54bil. As such, this would result in a divestment loss of RM920mil for Gamuda.
- In response, Azrul said the RM250.5mil offer was arrived after applying a noncompounding 12% ROE invested up to Dec 31,2012 and after the deductions of RM725.4mil in past dividend payouts.
- The amount of RM976mil was arrived based on a 12% non-compounded return for SPLASH’s shareholders’ initial investments of RM400mil (via RM50mil in ordinary shares and RM350mil in redeemable preference shares) since 2000. He added that the historical dividends of RM725.4mil were more than enough for SPLASH to recover their investments.
- He claimed that SPLASH had enjoyed lucrative returns with a profit of RM382mil and a pretax margin of 93.47% for FY13 ended March. In addition, he noted that SPLASH enjoys synergistic benefits as Gamuda Water Sdn Bhd (80%-owned by Gamuda, 20% by Sweet Water Alliance Sdn Bhd) holds the operation and maintenance (O&M) licence for the Sungai Selangor Phase 3.
- Recall that state had previously said the privatisations of the other concessionaires will still go through and do not depend on SPLASH’s acceptance. Nevertheless, SPLASH’s acceptance is still needed for an ultimate closure for the water saga.
- As such, we think that a fair valuation for SPLASH is still key to push the water impasse to a final resolution. In May, there have been indications by the state and Federal governments to re-examine bulk water supply payment to SPLASH. The continuation of the O&M licence is also a key point in negotiations.
- Note that the previous water assets in the other states were concluded at 1x book value. We have a BUY for Gamuda (Fair value: RM5.25/share), which reflects a 10% discount to Splash’s net book value of ~RM2.5bil as at end-Dec 2013. We maintain HOLD on Puncak Niaga, with a fair value of RM3.40/share. Maintain NEUTRAL.
Source: AmeSecurities
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