The Selangor government’s latest RM9.65 billion offer is derived in parts from the book value of the water assets held by the concessionaire, a spokesperson said.
This means that it is not valued using the discounted cash flow (DCF) method which takes into account future earnings from scheduled tariff hikes during the concession period, for distributor Syarikat Bekalan Air Selangor (Syabas), which the state is contesting.
“The value was derived after imputing a 12 percent annual return on equity and taking into consideration the outstanding water-related liabilities as well as the book value of the water assets.
“In the event that (the concessionaires) dispute the price, they can refer the matter to international arbitration, the result of which the state government is prepared to accept,” the state official said.
Analysts following the issue say that this use of book value as opposed to DCF, generally means that the total valuation will be lower than expected.
Nevertheless, an investment banker said, shortfall in water asset value could be made up through the equity portion of the offer.
Selangor last week made its fourth and final offer to take over water treatment concessionaires Syarikat Pengeluar Air Selangor Holdings (Splash), Puncak Niaga Sdn Bhd (PNSB), Konsortium Abass Sdn Bhd (Abass) and the state’s sole water distributor Syabas for a total amount of RM9.65 billion in a water industry consolidation exercise.
Abass, which is more than 90-percent owned by the state is unlikely to put up any resistance while sources within Splash indicate that the company has more or less agreed to the price.
The state controls 30 per cent of Splash, while the other shareholders of the water treatment company are construction giants Gamuda having 40 per cent equity interest, and businessman Wan Azmi Wan Hamzah with a 30 percent stake.
This leaves Puncak Niaga Holdings, which wholly-owns PNSB and owns 70 percent of Syabas.
No takeover without Puncak
Selangor added that the takeover offer which is valid until March 6, can only go through if all companies agree.This dispels market talk that the state would acquire Abass and Splash, even if Puncak rejected the offer.
“The issues at (PNSB) and Syabas are part of the overall problems that are plaguing the Selangor water sector. The restructuring of the Selangor water sector will not be possible without their participation,” the state spokesperson said.
This means that without Puncak, the situation is back to square one. The federal government also has a golden share in Syabas, but the Selangor government has heard nothing from its federal counterpart on the latest offer.
“However, both the deputy prime minister and the minister (in charge of water) have previously indicated that they have no objections to the state’s intention to takeover the water companies in Selangor,” she said.
Puncak’s executive chairperson Rozali Ismail yesterday said that it is writing to the state to get clarifications on the offer.
One analyst said that Puncak is likely wanting to clarify what the state has valued Syabas and PNSB’s liabilities at. The state’s investment arm Kumpulan Darul Ehsan Bhd (KDEB) is the state’s takeover vehicle, and plans to take over the concessionaires’ liabilities.
“The valuation for the liabilities is not a big problem for Abass and Splash because their liabilities are small, but PNSB’s and Syabas’ liabilities combined is more than RM4 billion,” he said.
CIMB Research in a note said that Puncak stands to gain RM1.1 billion in net proceeds, which works out to RM2.77 per share. This is more than double the prevailing share price.
However, the research house notes that the proceeds are still about a third lower than its DCF value of RM1.5 billion for Puncak’s stakes in the two entities.
“The offer would excite the minority shareholders, but it all depends on the owner. The market does not expect this deal to go through. The game-changer is when Rozali says the deal is good,” an analyst said
No comments:
Post a Comment