PETALING JAYA - The share prices of some water companies tumbled following news of the federal government's decision to invoke Section 114 of the Water Services Industry Act 2006 (Wasia), although no date has been fixed.
Analysts said the news was not totally unexpected, given that the Government had in the past two weeks reiterated its intention, and the shares had already priced in the expectations of Section 114 being invoked. They noted that the Government was adamant about resolving the water deadlock in Selangor's takeover of four water concessionaires.
CIMB Research said the news confirmed the research house's view that both the federal and state governments considered the water shortage issue as of "national interest".
"While Section 114 of Wasia only transfers the management and administrative authority to the federal government (and not the ownership of the assets), forced acquisition of the assets still looks unlikely as a separate renegotiation post-Wasia would be needed to solve the valuation deadlock for the takeover of the water assets," CIMB Research said in a note. The research house advised investors to "stay on the sidelines". It said unless the water players could strike a deal based on the agreed commercial terms, key risks include the uncertainty of the implications of Section 114, threats of a compulsory acquisition and the outlook thereafter.
Gamuda Bhd, which has a 40 per cent stake in concessionaire Syarikat Pengeluar Air Sungai Selangor Sdn Bhd or Splash, fell 17 sen to RM4.45 (S$1.72), making it one of the biggest losers of the day.
Puncak Niaga Holdings Bhd (PNHB) and its warrants, Puncak-WB, were down six sen each to RM2.88 and RM1.96 respectively, while Kumpulan Perangsang Selangor Bhd lost one sen to RM1.51.
Affin Investment Bank Bhd noted the current share prices of Gamuda and PNHB reflected the expectations of Section 114 being invoked while the concession holders and the federal and state governments continue to work on an amicable outcome in terms of asset pricing.