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Tuesday, March 21, 2017

KPS, GAMUDA, TALIWORKS : Potential benefit from SPLASH deal

Author: damiantreez | Publish date: Fri, 17 Mar 2017, 03:01 PM

KUALA LUMPUR (March 17): Gamuda Bhd and Taliworks Corp Bhd may see some upside from a potential deal between the Federal government and the Selangor state government for the sale of Syarikat Pengeluar Air Selangor (SPLASH), according to CIMB IB Research.

“We would not discount the possibility of special dividends from Gamuda (following the sale of SPLASH), although the quantum would depend on the final price tag and (whether or not) there is a haircut to the book value,” CIMB Research said.

Gamuda owns a 40% stake in SPLASH, its last targeted water asset in Selangor, the research house highlighted in a flash note on the water treatment and services sector March 16.

Meanwhile, Taliworks should see enhancements to its cash flow on potential recovery of receivables from SPLASH, even as it retains its recurring income from operations and maintenance (O&M) in Selangor, the research house said.

Kumpulan Perangsang Selangor Bhd (KPSB), which holds a 30% stake in SPLASH, could also be another direct beneficiary of the cash proceeds, said CIMB Research analyst Sharizan Rosely.

The sector note followed a report by The Edge Financial Daily yesterday that the Selangor state government may fork out as much as 40% of the price tag for the water services provider.

“This development is good news for the long-drawn-out takeover of SPLASH.

“We concur that the quantum of the potential tariff hike will be a political issue, but from the standpoint of the Selangor government, it is crucial for it to recover its capex from the acquisition and keep the water distribution operations, post restructuring,” CIMB Research said.

The research house remained neutral on its outlook for the sector.

At 11.02am today, Gamuda rose 0.39% or 2 sen to RM5.15 with 1.48 million shares traded, while Taliworks gained 2.41% or 4 sen to RM1.70, with 1 million shares done.

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