CIMB Research maintains Trading Buy on water sector

KUALA LUMPUR: CIMB Equities Research is maintaining is Trading Buy on the water sector after GAMUDA BHD []’s 40% associate Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH) made a revised takeover offer for all the water concessionaires in Selangor.

Under the revised offer, Splash will not own, but lease water assets from Pengurusan Aset Air Bhd. Its earlier offer of RM10.75 billion remains unchanged.

“The move was to align with the WSIA legislation. The acquisition price of RM10.8 billion is unchanged but now comprises PAAB’s RM8.1bn offer topped up by Splash’s offer of RM2.6 billion,” it said in a research note issued on Wednesday, April 21.

CIMB Research said while this development is a surprise, PAAB’s involvement at this juncture is understandable as SPLASH’s operating structure post consolidation should comply with the asset-light model under WSIA.

It added this is a positive turn of events as the new proposal has the backing of the federal government and an even better chance of going through.

“We maintain our TRADING BUY on the water sector. Puncak Niaga remains our top pick with an unchanged target price of RM4.50 (10% discount to DCF), backed by its effective takeover price of RM4.54/share.

“Gamuda remains an Outperform as it will still control 40% of the enlarged Splash. The deal will enhance our RNAV by 8.5% and push up our target price from RM4.30 to RM4.65, based on an unchanged 10% discount to RNAV,” it said.