KPS (5843) - How much KPS is worth?

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 How much KPS is worth?

News reported that Datuk Seri Azmin Ali has discussed about state’s water restructuring with MB Selangor Amirudin Shari recently. Quoting him, “the restructuring of the water industry services in Selangor has been delayed for a long time because of the lack of understanding and cooperation between the previous federal government and the state government, but now it will run smoothly as there is good cooperation between the state and federal governments under Pakatan Harapan,”


This means SPLASH, the only Selangor water asset left to be migrated, will be sold to Federal Government. The big question here what will be the valuation? Valuation of previous water asset takeover valuation such as Puncak Niaga Sdn Bhd, and Konsortium ABASS was at 1.0x Book Value. Hence, based on this, SPLASH should also be valued at 1.0x Book Value.

Based on a quick assessment on KPS’s sum of the parts valuation, KPS should be valued at least at RM2.92. Still, this is considered a very conservative valuation as the assumptions to value other revenue-generating businesses are only at acquisition price. Please refer table below. Hence, based on current share price, KPS is seen hugely undervalued. It is understood if KPS is trading at huge discount to its fair value previously due to unresolved SPLASH issue. But now, the discount should be removed already as SPLASH deal is coming this month.


Asset
Stake
Value
(RM m)
Assumptions
SPLASH
30%
990
1.0x Book Value
Century Bond
99%
208
Acquisition Price
King Koil
60%
116
Acquisition Price
CPI
100%
250
Acquisition Price
Smart Pipe
60%
5
Acquisition Price
Fair Value (RM)
1,569
No of shares (unit)
538
Fair Value/Share (RM)
2.92

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.
 
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