PUNCAK drop around 63% ~ potential share for investment?

PUNCAK (6807) http://www.puncakniaga.com.my/

Background:

• Established in 7th January 1997 and listed on the Main Board of KLSE on 8th July 1997 (14 years in business).
• This company is the leading regional integrated water, wastewater and environmental solutions provider and to emerge as a significant player in the oil & gas sector.
• The company structure is as follows:

Current Share Price:  1.13





My View:

This share has drop around 63% recently since Sept 2010.

Why DROP so much??

Check this out (article in 2010):

Tan Sri Rozali paid RM21,795 per day in 2009

According to Puncak Niaga Holding Bhd’s audited account for 2009, Syabas CEO Tan Sri Rozali Ismail was paid RM6.8 million. Rozali is also the Selangor Umno treasurer. Recent news reports have contained allegations that Syabas imported RM375 million worth of pipes from an Indonesian company owned by Rozali, instead of sourcing them locally in June 2005.

More than 72% of contracts, worth RM600 million, was awarded through direct negotiation, not open tender process. Between 2005 and 2007, RM325 million could not be accounted for in Syabas’s public accounts and the record of contracts. RM51.2 million, or 120% more than the RM 23.2 million approved by Jabatan Kawalselia Air Selangor (JKAS), was spent on Syabas office renovations.

Meanwhile, the profits of Puncak Niaga, the holding company of Syabas has dropped from RM364.5 million in 2005 to RM21.57 million in 2008. The total debt of the Selangor water privatised companies is RM6.4 billion but they have been paying dividends amounting to more than RM700 million to-date.

In December 2009, the federal government provided a RM320.8 million back-loaded interest free unsecured soft loan to Puncak Niaga, the holding company of Syabas, to settle their debts.

The federal government is reported to be looking into a further RM1 billion bailout of Syabas at the end of this year.

http://www.mysinchew.com/node/49312?tid=14

Disregards the above, Puncak:

• Operate, manage and maintain 29 Water Treatment Plants in Selangor and KL (equivalent to approx. 49% of treated water distributed to the five million domestic agricultural and industrial end-users.)
• Operate and maintain 3 Dams (Sungai Langat, Klang Gates and Tasik Subang)
• The above operates & maintains agreement expires on 31 December 2020 (started since 1994/95, approx. 25/26 years of contract) 9 more years to go

I'm currently looking at this share at the moment. The reasons i might invest this are as follows:

a) Value drop 63%
b) Major shareholder are 

• Tan Sri Rozali Bin Ismail with approx.  41.25%
• Central Plus (M) Sdn Bhd with approx. 30.24%
• EPF with approx.                                     11.08%
• Total approx.                                          82.57%

Even things happened in 2009, until now Tan Sri Rozali Bin Ismail still tworking as the Executive Chairman. Wonder why? Must be a very powerful guy?

EPF in 1Q2010 hold approx. 13.53% of this company shares, until now 3Q2011 it still has approx. 11.08%. Why? Previously purchase price too high? They believe the price will go up? Have you ever heard companies with EPF as major shareholder gone bankrupt before?

Puncak still have 9 more years to go with the existing contract. Easy money continue to flow in? Selangor got approx. 5.5millions of populations. Say RM1 increased every month for 9 yrs = RM594millions

Puncak now have more business in China and India. More potential to increase profit?

One main point is Puncak have stop paying out dividends now. If you are not risk taker, you should consider put it in the bank for FD and get around 3% interest per annum.