Stock Name: TANJONG
Company Name: TANJONG PUBLIC LIMITED COMPANY
Research House: MAYBANK
Tanjong plc
(April 6, RM18.96)
Maintain buy at RM18.96, target price of RM19.10: Tanjong aims to double its power capacity as it sees plenty of potential for the power division, especially in the Middle East and North Africa. It aims to double its current 3,951MW of installed capacity over the next five years. However, this will not be at the expense of returns.
Shareholder value is still its paramount concern. Our RM19.10 per share target price does not include anything for new projects.
Many power projects, which had been held back amidst the financial turbulence last year, are now open for bidding. Tanjong's experience in greenfield development as well as its success in integrating new plant acquisitions stand it in good stead. A deal similar to the 895MW Globaleq acquisition in 2007 could add about RM1.80 per share to our revised net asset value (RNAV).
As for its Tropical Islands venture, operating losses have narrowed to €3 million to €4 million (RM12.9 million to RM17.2 million) per annum. Tanjong's developer joint-venture partner has completed 21 homes and is targeting another by summer-end. Profitability is contingent on more accommodation units being built.
However, Tanjong will not be injecting any further equity. It will seek partnerships. To this end, a development master plan is being prepared.
On its gaming plans, Tanjong's application for a new game, made a few months ago, is still pending. Elsewhere, the management is engaging the tote board, turf clubs and regulators on the issue of rising totalisator losses. Sports betting, if introduced, is unlikely to cannibalise the 4D game. The markets are different, and also, sports betting would not be entirely new. The licensed operator will likely take market share from the informal operators.
Tanjong has a solid platform for growth. We forecast RM1.5 billion per annum free cash flow (FCF) over the next three years. Maintaining the RM1 gross dividend per share (DPS) requires just RM302 million per annum. Gearing the balance up 70:30 gives the group a total RM12 billion of acquisition currency, sufficient for 2,500MW to 3,600MW at US$1 million (RM3.21 million) to US$1.5 million per MW. Its last acquisition of seven power plants from Globaleq in 2007 was at US$700,000 per MW. - Maybank IB, April 6
This article appeared in The Edge Financial Daily, April 7, 2010.
Company Name: TANJONG PUBLIC LIMITED COMPANY
Research House: MAYBANK
Tanjong plc
(April 6, RM18.96)
Maintain buy at RM18.96, target price of RM19.10: Tanjong aims to double its power capacity as it sees plenty of potential for the power division, especially in the Middle East and North Africa. It aims to double its current 3,951MW of installed capacity over the next five years. However, this will not be at the expense of returns.
Shareholder value is still its paramount concern. Our RM19.10 per share target price does not include anything for new projects.
Many power projects, which had been held back amidst the financial turbulence last year, are now open for bidding. Tanjong's experience in greenfield development as well as its success in integrating new plant acquisitions stand it in good stead. A deal similar to the 895MW Globaleq acquisition in 2007 could add about RM1.80 per share to our revised net asset value (RNAV).
As for its Tropical Islands venture, operating losses have narrowed to €3 million to €4 million (RM12.9 million to RM17.2 million) per annum. Tanjong's developer joint-venture partner has completed 21 homes and is targeting another by summer-end. Profitability is contingent on more accommodation units being built.
However, Tanjong will not be injecting any further equity. It will seek partnerships. To this end, a development master plan is being prepared.
On its gaming plans, Tanjong's application for a new game, made a few months ago, is still pending. Elsewhere, the management is engaging the tote board, turf clubs and regulators on the issue of rising totalisator losses. Sports betting, if introduced, is unlikely to cannibalise the 4D game. The markets are different, and also, sports betting would not be entirely new. The licensed operator will likely take market share from the informal operators.
Tanjong has a solid platform for growth. We forecast RM1.5 billion per annum free cash flow (FCF) over the next three years. Maintaining the RM1 gross dividend per share (DPS) requires just RM302 million per annum. Gearing the balance up 70:30 gives the group a total RM12 billion of acquisition currency, sufficient for 2,500MW to 3,600MW at US$1 million (RM3.21 million) to US$1.5 million per MW. Its last acquisition of seven power plants from Globaleq in 2007 was at US$700,000 per MW. - Maybank IB, April 6
This article appeared in The Edge Financial Daily, April 7, 2010.
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