Affin Hwang raises Taliworks TP to RM1.18

KUALA LUMPUR (Dec 30): Affin Hwang Capital Research has maintained its "buy" call on Taliworks Corp Bhd with a higher target price (TP) of RM1.18 from RM1.12 previously.

The infrastructure company on Friday sold its receivables due from Air Selangor for RM665 million to an independent special-purpose vehicle Starbright Capital Bhd.

In a note today, it said the RM665 million disposal price for the receivables due from Air Selangor was higher than the research house's discounted cash flow (DCF) valuation of RM638 million assumed in its previous realisable net asset value per share (RNAV/share) estimate of RM1.24 for Taliworks.

"We gather that the realised value was based on a low discount rate of 3.8 per cent (similar to yield on Cagamas bonds) compared to our assumption of five per cent to derive our DCF valuation," it said.

Hence, the research firm said it raised its RNAV/share estimate to RM1.30 to reflect the higher realised value for the receivables.

"Based on the same 10 per cent discount to RNAV, we raise our TP to RM1.18 from RM1.12 previously," it said.

Meanwhile, Affin Hwang expects Taliworks to increase dividend payout to 1.8 sen for the fourth quarter of 2019 (Q4 2019) ending Dec 31, 2019 from 1.2 sen in Q3 2019, given its improved financial position, following the successful securitisation of the receivables to raise RM665 million cash upfront.

"From a net debt of RM299 million in Q3 2019, we estimate Taliworks has turned to a net cash position of RM366 million or RM0.18 per share," it added.

In a filing with Bursa Malaysia on Friday, Taliworks said Starbright Capital had issued an asset-backed medium term notes (ABS MTNs) of RM665.0 million in nominal value to Taliworks’ wholly-owned unit Sungai Harmoni Sdn Bhd.

The company said the ABS MTNs issued by Starbright have been assigned an ‘AAA’ rating by RAM Rating Services Bhd.

At 10.50 am, Taliworks share rose three sen to 90 sen with 1.18 million shares changing hands.