Top Story : Infrastructure – IFRIC 12 to hit NTA and earnings of concessionaires Neutral
Sector Update:
♦ IFRIC 12 - Service Concession Agreements, which covers the accounting treatment of service concession agreements in the financial statements of the operator, is targeted to take effect in Malaysia from 1 Jul 2010.
♦ We reckon that the implementation of IFRIC 12 will impact concessionaires under RHBRI’s infrastructure sector (i.e. PLUS Expressways and Puncak Niaga) in two major aspects, i.e.: (1) Concessionaires can no longer recognise concession assets as tangible assets; and (2) Concessionaires that are currently amortising concession assets using revenue method will have to switch to either straight line or use of volume method.
♦ In any case, this is nonetheless accounting entry and it will not affect our DCF-derived indicative fair value on these companies.
♦ IFRIC 12 aside, we continue to like PLUS (OP, FV = RM4.13) for its defensive earnings growth and decent dividend yield of 5-6% per annum. As for Puncak (MP, FV = RM2.95), we continue to believe that the water sector restructuring in Selangor by the Federal Government is unlikely to materialise any time soon.
RHB Equity 360° (Infrastructure, IJM, Hai-O; Technical: Evergreen, Proton) - 22/03/2010
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