In a third such partnership with Malaysia-based Employees Provident Fund (EPF), Taliworks Corporation Bhd is acquiring a 35 per cent stake in a waste management company, SWM Environment Holdings Sdn Bhd (SWMEH), for MYR245 million ($60.43 million).
The stake acquisition in SWMEH will result in immediate earnings accretion to Taliworks as the former is a mature, profitable and substantial solid waste and public cleansing business in Malaysia.
EPF purchased a 35 per cent stake in SWMEH in December 2015. Another company which owns the remaining 30 per cent in SWMEH was not disclosed.
SWMEH has a concession tenure untuk August 2033.
Taliworks received shareholders’ approval for the acquisition on Tuesday, at its annual general meeting.
Additionally, shareholders also approved the company’s proposed disposal of its entire China waste and wastewater management businesses for a total sale consideration of $54.6 million.
Taliworks is a pure-play infrastructure company engaged in water treatment, highway and toll management, waste and wastewater management.
For EPF, SWMEH is the fund’s first waste management asset.
EPF deputy chief executive officer (investment) Mohamad Nasir Abdul Latif said assets like this are attractive to EPF due to the steady returns.
“For a fund that focuses on generating real rate of returns, this partnership is ideal as it is in line with our diversification programme and is able to provide stability and predictability of income. Furthermore, it benefits from Malaysia’s demographic and regulatory framework,” he said.
To a question whether EPF will look into more waste management assets to invest, Latif said the fund will not be sector-focused, but will look at cashflow stability for their investments.
Taliworks executive director Ronnie Lim Yew Boon commented that the partnership with EPF will continue to drive Taliworks’ merger and acquisition business expansion model.
“Jointly, we will continue to target strategic assets that will generate immediate cashflow and earnings accretion to both entities which will ultimately support Taliworks’ dividend policy,” he said.
Both Taliworks and EPF have two joint ventures prior, both highway concession assets.
In 2014, EPF acquired 49 per cent stake in Grand Saga Sdn Bhd, which holds the concession for the Cheras-Kajang Highway until September 2045.
In 2015, EPF bought 37.5 per cent equity interest in Grand Sepadu Sdn Bhd, which is the concession holder of the New North Klang Bypass Expressway until December 2032.
Both parties see more collaboration opportunities in the future.
When asked if EPF will consider acquiring a direct stake in Taliworks for strategic purposes, Latif commented that if valuations are right, the fund would consider acquiring stake in the company.
Moving forward, Taliworks’ new business strategy is to focus on its portfolio of investments towards mature operational cash-generating utilities or infrastructure businesses in Malaysia and developed markets, as well as when appropriate to partner with EPF.
Taliworks aims to expand and strengthen its recurring earnings and cash flow stream from long-term concessions to sustain its dividend payout policy.