Puncak Niaga Holdings : 3QFY08: Target price revision

December 1, 2008 at 7:03 am Leave a comment

• Almost flat 3Q topline
The company’s 3Q08 results came in mixed, with 9-month FY08 revenue and net profit coming in at RM1.05bn and RM25.9m respectively. 3Q08 revenue was only 0.1% higher q-o-q (+2.8% y-o-y), attributable to higher water revenue. Net profit expectations would have fallen broadly in line had there not been a reversal in the minority interest charge during the quarter under review. The Group has also recently concluded the exercise of its call option on the 17.5% it had sold in Puncak Niaga (M) Sdn Bhd as
part of its capital repayment exercise, which will further reduce the outflow to minorities in the coming periods.
• PBT lower y-o-y but higher q-o-q
The group registered a lower y-o-y PBT of RM20.8m compared to RM35.3m recorded in 3Q07. This represents a 41.4% y-o-y decline and is attributed to higher operating costs, finance costs and depreciation and amortisation expenses. The group stated that the higher finance costs was due to the further
drawdown of BAMTN in Syabas to fund its operating cash flow deficit, while the increase in depreciation and amortisation was due to changes in the projected revenue of Syabas following a review at the end of 2007.
However, PBT has improved by 15.3% q-o-q, moving up from RM18.0m in 2Q08 to RM20.8m this quarter.
• Higher costs eroding margins
The group expects to incur higher costs as it continues with its efforts to reduce non-revenue water, increase collection and maintain its service level in line with the KPIs set out under the Concession Agreements. We have imputed the higher costs in our forecast for FY08 onwards and have revised downwards our bottomline for these years and our TP.
• Target price revised downwards to reflect uncertainties
We have revised our TP downward to RM3.30, imputing a higher discount (50%) to our DCF value of RM6.71, taking into consideration the eroding margins and the uncertainties within the industry at this point in time.

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