KDEB may bid for Gamuda's Splash stake

KUMPULAN Darul Ehsan Bhd (KDEB), will make an offer by as early as September to buy Gamuda Bhd's stake in Syarikat Pengeluar Air Selangor Sdn Bhd (Splash), people working on the project said yesterday.

"The state will give notice to Gamuda by as early as next month of its intentions to pursue the acquisition as the financial stress test on the valuation of the company has just been completed," a finance executive who worked on the project said.

Gamuda owns 40 per cent of Splash, while the remaining equity is equally held by Tan Sri Wan Azmi Wan Hamzah's The Sweet Water Alliance Sdn Bhd and KDEB.

Gamuda's stake in Splash is valued at between RM700 million and RM1.3 billion, depending on the methodology used. JP Morgan, using the discount cashflow (DCF) method values the stake at RM1.17 billion, while Macquarie Research in a report said based on DCF, the stake is valued at RM1.3 billion.

Splash, with a concession that runs up to December 31 2030, is the largest water producer in the state, producing some 43 per cent of the state's total water supply.

"KDEB is in the process to acquire the water assets. We will elaborate on the specifics in due time, as we hope to have the scheme in place by September," said KDEB's corporate communications general manager Necia Abdullah in a text reply to Business Times.

Gamuda, the country's second largest builder might be willing to cash out, as gains from the sale could be used for other purposes abroad.

The builder is under scrutiny over plans to invest as much as RM1.5 billion in property ventures over the next three years in Vietnam, which has a currency cum financial crisis looming over its head.

"Delays in property sales in Vietnam could also mean that Gamuda would have to rely entirely on borrowings to fund its initial infrastructure outlay," Choong Wai Kee of Citigroup, wrote in a report dated May 29.

Early this year, Gamuda's managing director Datuk Lin Yun Ling had told this paper that the builder was in preliminary exploration for a possible sale of Splash.

By New Straits Times (by Francis Fernandez)