CIMB Equities Research is maintaining a Trading Buy on the water sector as it expects newsflow to pick up in the coming weeks, leading to clarity on the federal government’s plans for the state’s water industry.
“The 1.0 times book value used in the takeover in Johor should be the benchmark for the transactions in Selangor. Overall, consolidation continues to be the key catalyst for the sector,” it said in a research note on April 13.
CIMB Research said the Pahang-Selangor water transfer project should revive activities on the infrastructure side. The letter of intent had been awarded to IJM’s consortium for the tunnelling portion and Pengurusan Aset Air Bhd (PAAB) was overseeing the progress of Langat 2.
“We maintain our Trading Buy on Puncak Niaga (RM3.40 target price based on a 30% discount to discounted cashflow value), backed by a hypothetical fair acquisition price of RM3.29 which was its book value. IJM Corp remains a potential winner for the water transfer tunnel project while Gamuda could return additional cash from the sale of SPLASH as dividends. We rate both stocks as TRADING BUYs,” it said.
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