Water: Juiced-up offers?
Yesterday, Kumpulan Perangsang Selangor’s (KPS) (KUPS MK, Not Rated) share price spiked 36 sen or 20%, possibly on speculation of headway being made on the consolidation/acquisition plans for water assets in Selangor. We followed up with industry checks and were positively surprised to learn that the Selangor state government may make fresh takeover offers to PNSB, Syabas, ABBAS and SPLASH soon. The new offers are likely to be attractive. We gather that the Jun 09 deadline for the state government to make alternative offers to the four water concessionaires in Selangor is unchanged. Several meetings have been held between the federal and state governments via a joint committee over the past 2-3 weeks. The federal government is represented by the Ministry of Finance officers, EPU and PAAB, among others. The state government is represented by the state secretary and KDEB, among others. An alternative valuation parameter by the state government has been agreed on and a takeover offer is likely to be made within the next 1-2 weeks. The target acquirees are unchanged – PNSB, Syabas, Splash and ABBAS. Puncak is likely to be offered RM3.50-4.00/share, based on the sum of parts of PNSB and Syabas. The price tags for Splash and ABBAS are likely to be much better than the initial offers and more acceptable. The breakdown of acquisition values is not available but it will apparently be roughly 1x BV + returns/premium. Indications are that the derived value will not be too far off from the DCF method. Borrowing/bonds held by the four concessionaires will be addressed. PAAB is likely to take over the bonds while the state government takes control of the concessions. The deal could shape up to a back-to-back deal, which could work.
