We view Puncak’s RM71m acquisition of Global Offshore and KGL as positive and a pipeline into the oil & gas business. Another piece of good news is the award of the largest water project in Sarawak to date, which will boost Puncak’s track record as a water infrastructure specialist. These developments are likely to revive sentiment on the stock, which has fallen 12% YTD due to the protracted delays in Selangor’s water asset consolidation. But the talks may start again as the federal government will be taking over the water bonds soon. We up our FY11-13 EPS forecasts by 2-10%, which raises our target price from RM2.72 to RM3.03, still based on a 40% discount to its SOP value. We upgrade Puncak from Neutral to TRADING BUY as yesterday’s announcements may trigger a re-rating, along with progress in Selangor.
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