Oleh : Yeow Pooi Ling
PETALING JAYA: Investors are uncertain over the prospects of companies with water-related projects especially in Selangor, where a new government would be formed following Saturday's election results.
The opposition parties garnered a majority of state seats to enable them to form the new government
This has raised concerns over, the Pahang-Selangor interstate water transfer project that has already been awarded. There are also worries that the expected consolidation of water supply and distribution in Selangor might be reviewed.
Water stocks suffered the biggest losses when the market opened for trading yesterday.
Kumpulan Perangsang Selangor Bhd (KPS), a subsidiary of Selangor investment arm Kumpulan Darnl Ehsan Bhd, was severely sold down falling almost 51% to RM1.68.
Also affected was KPS' assodate JAKS Resources Bhd, which fell to an intra-day low of 56 sen before recovering to close 38% lower at 62 sen.
Shares in Selangor water concessionaire Puncak Niaga Holdings Bhd lost almost 30% in value, ending at RM3.18, off its intra-day low of RM3.
An industry source said the fundamentals ofJAKS were intact as most of the contracts were currently being negotiated with the Federal Government, hence the change in the Selangor government would have little impact.
MBesides, the Langat 2 project is driven by demand and supply. With Selangor expected to face water shortage next year, the contract would have to proceed," he said.
He also pointed out that JAKS was one of few players with the capability and capacity to undertake such a huge contract.
An analyst with a local brokerage noted that the sell-down in water stocks was driven by fears that the award and implementation of contracts would be reviewed by the new government.
The bargaining level has changed. The water sector consolidation process might take on new perspective given the new government," he said.
While the new administration was likely to honour the sanctity of Langat 2, the concern now was how they would implement the project, he added. .
In the long term, the state government will still need to address the water shortage issue as it affects the masses.
The analyst noted that Puncak Niaga was scheduled to granted a tariff hike next year, estimated at about 37%. for the supply and distribution of water in Selangor and the Federal Territory.
Through the proposed consolidation, the Federal Government would take over the assets and as a result, there would be no tariff hike," he said.
The Japanese government, which is funding the Pahang portion, is also expected to add pressure for the implementation of Langat 2.
The analyst said the selling of water stocks was a knee-jerk reaction, noting that Puncak Niaga and KPS were backed by assets.
Besides JAKS, KPS also has stakes in Konsortium Abbas Sdn Bhd and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd.
"It is short-term pain for long-term gain as there could be more cost-control efforts and the benefits passed on to. users," the analyst added.
Another analyst with a local research house said the Selangor government would play a vital role in the consolidation process as well as the implementation of Langat 2.
"Previously, KPS was given the green light to helm the restructuring but it is now uncertain as to who will be driving the consolidation and who will benefit," he said.
If these were resolved by the year-end, Puncak Niaga would demand for its scheduled hike next year and the state government would have to compensate if the concession agreement was not honoured, he added.
