WHY KPS IS A STRONG BUY?
Selangor Government is looking to resolve the SPLASH issue by next month.
This news is certainly positive to SPLASH shareholders such as KPS and Gamuda. KPS owns 30% while Gamuda owns 40% and the remaining 30% owned by a private company, Sweet Water Alliance. Key issue in SPLASH was the valuation. Back in previous MB time (before Dato’ Seri Azmin Ali), Tan Sri Khalid Ibrahim offered SPLASH shareholders at a valuation of only RM250m, which represents less than 0.1x book value of SPLASH. This is too low as compared to offer of other water assets in Selangor such as Puncak Niaga Sdn Bhd (PNSB) and Konsortium Abass (ABASS) at 1.0x BV. Of course SPLASH shareholders rejected the offer. Till then no deal has been made between Selangor state government and SPLASH.
SPLASH book value worth RM3.3b.
Currently SPLASH’s book value worth RM3.3b. At 3.3b book value, KPS’s 30% stake in SPLASH is worth RM990m. This is equivalent to RM1.84 of KPS per share !!! More than current share price of KPS !!! Of course, the concern is now whether Selangor state government can actually pay at 1.0x book value. Well, if Selangor State Government wants to be fair, they need to offer SPLASH shareholders similar valuation as what they offered to PNSB and ABASS. This in line with our PM’s principle of “rule of law”.
No more political issue.
The key investors’ concern (i.e. politics) has now been removed. The federal government and Selangor state government is now in the same party and it is believed that the takeover issue will be resolved smoothly and quickly.
KPS’ business and fundamentals remain solid under strong management
KPS has been acquiring good and stable companies that are already generating steady income in the various sectors namely:
Century Bonds, market leader in industrial packaging,
CPI (Penang) Sdn Bhd, fully integrated EMS provider, and
60% stake Kaiserkorp Corporation Sdn Bhd (“Kaiserkorp”), a license holder of strong brand Kingkoil.
In a nutshell, investors should seize this opportunity given the fact that KPS is a direct beneficiary of soon-to-be resolved SPLASH issue. Finally, KPS’ value that trapped due to SPLASH finally can be realized soon. Technical wise, KPS is currently in the bullish trend which can go beyond RM2.11/share based on monthly chart.
Disclaimer: This is my personal opinion and not recommendation. Please ask your remisier or dealer representatives before making any decision. Trade at your own risk.
http://klse.i3investor.com/blogs/kpsstrongbuy/162285.jsp
