Friday, January 7, 2011

OSK Research: Selangor govt RM9b water offer may be rejected

KUALA LUMPUR: OSK Research said the Selangor government's offer price of more than RM9 billion to take over the water assets may be rejected by the water concessionaires.

It said on Friday, Jan 9 that gauging from the offer price of over RM9 billion, this pricing comes close but is still lower than SPLASH's previous offer to consolidate the state's water assets at RM10.75 billion.

'This makes the latest offer price less attractive. Although the offer did not detail the Selangor government's valuation approach, we reckon that it is likely to have been based on book value,' it said.

OSK Research said despite claims that the offer has been made, it has yet to see any official announcements on Bursa Malaysia.

'Nonetheless, should an offer be based on the above-mentioned points, we reckon that water concessionaires are likely to reject the offer on the grounds that the crucial issues are not being addressed. We expect more details to be unveiled once an official announcement is made on Bursa.

'Thus far, we maintain our OVERWEIGHT recommendation on the water sector as well as Puncak's target price at RM3.85, for exposure to the Selangor state water asset consolidation. This target price is premised on our year-end forecast for Puncak's FY10 BV per share,' it said.

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