Featured and Exclusive  |  FEBRUARY 27, 2013 9:19AM

Rozali asks Selangor to explain

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Rozali Ismail (Photo from:

Rozali Ismail
(Photo from:

Water concessionaire Puncak Niaga Holdings Bhd has sent a letter to the Selangor government seeking clarification on certain aspects of the offer made by the state, for its assets.

“We haven’t finalised anything yet. Only after the clarifications are made can we decide on whether to sell or not. We have a few things to clarify, only then can we decide… It’s still early,” Puncak’s executive chairman and controlling shareholder Rozali Ismail told KiniBiz.

Puncak wholly owns Puncak Niaga (M) Sdn Bhd (PNSB) a water treatment company, and has 70 percent of water distributor Syarikat Bekalan Air Selangor Sdn Bhd (Syabas).  

Rozali also cast doubts on whether the other big water treatment player, Syarikat Pengeluar Air Selangor Holdings Bhd (Splash) would accept the offer made by the state.

“I’m sure they (Splash) have a lot of questions as well,” Rozali quipped.    

Kinibiz had reported recently that officials of Splash had met up on Monday and were more or less certain to accept the offer next week.

Rozali has 41.25 percent equity interest in publicly traded Puncak. Syabas meanwhile is key in the water equation as it has the mandate to supply treated water to Selangor, Kuala Lumpur and Putrajaya.

The state via its investment arm Kumpulan Darul Ehsan Bhd (KDEB) had made an offer of RM9.65 billion for all the water assets in the state, with the aim of consolidating the fragmented industry, with the deadline for acceptance on March 6. Puncak’s portion of the offer, for its two concessions is RM5.6 billion.

On whether things would change— his acceptance or rejection of the offer— on the outcome of the general election and how Barisan Nasional (BN) fares, Rozali said, “I cannot comment on BN’s chances… I am not a politician.”

MB cheras gangguan air 01However he added, as president of the Selangor Malay Chamber of Commerce he was disappointed with how the opposition Pakatan Rakyat was running the state.

“They have not done a lot for poor Malay businessmen compared to BN. So the chamber feels that the state government must re-look their promises, what they have not delivered, and their contribution to Malay businesses…it is very sad. They must re-look their manifesto,” Rozali added.

The state is looking to consolidate the four concessionaires, Syabas, PNSB, Splash and Konsortium Abass. Other than Rozali, the state is also a major player in the water sector as it owns more than 90 percent of Konsortium Abass, has 30 percent in Splash and 30 percent in Syabas.

The other shareholders of Splash are construction giant Gamuda Bhd which has a 40 percent equity interest, and businessman Wan Azmi Wan Hamzah who has 30 percent in the water treatment company.  

In previous offers, Rozali has been the stumbling block. He is known to be linked to Umno, the lead member of the ruling coalition. To make things worse the federal government has a golden share in Syabas, which gives it a large say over what Rozali can do with the company.

Rozali has been at logger heads with the state as Selangor has opposed tariff hikes of 37 percent slated to come into effect in 2009, and another increase of 25 percent, which was supposed to take have taken effect early last year. If BN wins it is likely that these tariff hikes will be implemented, and will increase Puncak’s valuations.   

Politics aside, an analyst from a bank backed research house said that he is not sure if Rozali will accept the state’s offer.

“The offer does have its merits. If you look at it on a per share basis, the RM5.6 billion works out to about RM2.70 per share after stripping off the liabilities…this is much higher than Puncak’s trading price.


“However, it is not clear how the state is valuing the assets this time around. In previous offers they used the book value method, when the DCF (discounted cash flow) would be more accurate as it takes into account future cash flows…so it boils down to how Rozali values his assets,” the analyst said.

For its nine months ended Sept 2012, Puncak posted pre-tax profits of RM335.51 million from RM2.76 billion in revenue. Earnings per share for the nine month period was 55.01 sen.

Without the tariff hikes, Puncak has been hard pressed to ensure profitability. However the federal government has been providing Puncak with soft loans. In Puncak’s balance sheet there is a RM278.07 million government grant.

Puncak has also hedged its bets, and gone into the oil and gas sector from just depending on water treatment and distribution.

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