Common Contracts

OVERWEIGHT

July 13th, 2015

• Filed
  July 13th, 2015

In line with our expectation, the supplemental agreement for the water industry restructuring and consolidation of Selangor, Kuala Lumpur and Putrajaya was finally signed last Friday, 10 July 2015. This marked the conclusion of the Selangor State Government negotiations with Federal Government. This news certainly reinforces our OVERWEIGHT stance on the Water sector. We advocate investors to accumulate Puncak for the special dividend payment of RM1.00/fd shares. As we update our earnings forecasts, roll over our valuation benchmark to FY16 and imputing higher discount to SOP, PUNCAK’s TP is revised to RM3.29 from RM3.99 previously. It is however, still an OUTPERFORM call with potential upside of 18%. As for SPLASH, we expect negotiation between SSG and GAMUDA and Sweet Water Alliance on the valuation issues to resume after SSG completed the PUNCAK’s SPA. Furthermore, we expect the story of NRW reduction program or pipe replacement to emerge soon. As we expect the government to graduall