Puncak Niaga Holdings Bhd. : Potential trap?

Puncak Niaga Holdings Bhd. relative valuation is now UNDERVALUED. It was previously rated NEUTRAL, and has a fundamental analysis score of 18.

Our analysis is based on comparing Puncak Niaga Holdings Bhd. with the following peers – Hap Seng Plantations Holdings Bhd., PBA Holdings Bhd., Taliworks Corp. Bhd., Anhui Water Resources Development Co., Ltd. Class A, Swiber Holdings Limited, SapuraKencana Petroleum Bhd., PetroVietnam Southern Gas JSC, Berjaya Assets Bhd., UMW Oil & Gas Corporation Bhd and Asian Pac Holdings Bhd. (5138-MY, 5041-MY, 8524-MY, 600502-CN, AK3-SG, 5218-MY, PGS-VN, 3239-MY, 5243-MY and 4057-MY).

Relative Valuation

Puncak Niaga Holdings Bhd.’s price of MYR 2.63 is lower than CapitalCube’s implied price of MYR 3.19. CapitalCube believes that at these levels, Puncak Niaga Holdings Bhd. is undervalued and has upside potential. Over the last 52 week period, the stock has fluctuated between MYR 2.29 and MYR 3.76.

Relative Valuation

Company Overview

  • Relative underperformance over the last year and the last month suggest a lagging position.
  • Puncak Niaga Holdings Bhd. trades at a lower Price/Book multiple (0.53) than its peer median (0.73).
  • The market expects 6807-MY to grow more slowly than its peers and for its median ROE to decline.
  • 6807-MY has relatively high profit margins while operating with median asset turns.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • 6807-MY‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • 6807-MY‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low PE ratio suggests substandard growth expectations relative to peers.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.

Investment Outlook

Puncak Niaga Holdings Bhd. has a fundamental score of 18 and has a relative valuation of UNDERVALUED.

Puncak Niaga Holdings Bhd. lies at the bottom left quadrant of CapitalCube’s Value – Price Matrix. We call this space a Value Trap. At this level, Puncak Niaga Holdings Bhd. is potentially undervalued, since it trades lower than its CapitalCube Implied price of 3.19. However, its fundamental analysis score is also on the lower side at 18, begging the question whether the low price is on account of the weaker fundamentals.

Fundamentals Vs Relative Valuation

Drivers of Valuation

The market expects 6807-MY‘s current median rates of return to decline.

The market expects less growth from 6807-MY than the median of its chosen peers (PE of 5.80 compared to peer median of 8.88) and for its current rates of return that are around peer median (ROE of 9.88%) to decline.

The company trades at a lower Price/Book multiple of 0.53 compared to its peer median of 0.73.

Valuation Drivers

6807-MY has moved to a relatively low PE from an Harvesting profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Puncak Niaga Holdings Bhd. is an investment company, which engages in the operations, maintenance, management, construction, rehabilitation, and refurbishment of water treatment facilities. It also supplies and distributes treated water; undertakes offshore installation contract works; and provides research and technology development for the water, wastewater, and environment sectors. The firm operates through the following segments: Water Treatment, Oil and Gas, and Constructions. The Water Treatment segment includes operation, maintenance, management, construction, rehabilitation and refurbishment of water treatment facilities. The Oil and Gas segment offers offshore, logistics, and marine management services. The Constructions segment focuses on construction activities. The company was founded on January 7, 1997 and is headquartered in Shah Alam, Malaysia.

Disclaimer

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