TNB bill summons to have minimal impact on Gamuda’s earnings
KUALA LUMPUR: Gamuda Bhd (Gamuda) will likely see minimal impact on its earnings from the four writs of summons totalling RM39.5 million filed by Tenaga Nasional Bhd (TNB), analysts observed.
In a filing on Bursa Malaysia, Gamuda said its 80-per cent owned subsidiary Gamuda Water Sdn Bhd (Gamuda Water) received four writs of summons on March 1, 2018 filed by TNB.
The TNB suits are premised on Gamuda Water’s outstanding electricity bills up to end January 2018, interest on the outstanding sum at five per cent per annum calculated from end January 2018 to the date of settlement, and costs and other reliefs.
The research arm of Hong Leong Investment Bank Bhd (HLIB Research) commented: “Earnings impact from the summons is expected to be minimal as the electricity bills have been expensed (and booked into the balance sheet as payables) as and when they are incurred.”
As such, it retained its forecast. However, it also noted that SPLASH (40 per cent owned by Gamuda) has not been receiving its full quantum of billings from SYABAS (which is now owned by Air Selangor) since 2008.
“As a result, SPLASH’s payments to its O&M operators, namely Gamuda Water and Sg Harmoni (owned by Taliwork) have also been below the billings,” it pointed out.
It also gathered that SPLASH has further reduced its monthly payments to the O&M operators since mid-2016 from 60 per cent of billings to 34 per cent.
“As a result of the prolonged effect of this further reduction, the O&M operators faced difficulties in paying its electricity bills. Just last week, Sg Harmoni was also hit by the same summons from TNB,” it explained.
It noted that delays in resolving the Selangor water saga would mean that payments to SPLASH (and consequently the O&M operators) would be below the billed amounts (balance is recorded as receivables).
“This would make it difficult to cover operational costs (as evident from this recent summons from Tenaga) and maintenance on the water treatment plants, the research team further highlighted,” it explained.
Overall, HLIB Research maintained a ‘buy’ call on the stock. It said, “Gamuda’s earnings upcycle is poised to hit another round of multi-year highs in FY18 and FY19. It is also a key play to ride on the upcoming mega rail projects such as the HSR, ECRL and MRT3.”