Company Name: YTL POWER INTERNATIONAL BHD
| Research House: HLG | Price Call: BUY | Target Price: 2.23 |
Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
| Research House: HLG | Price Call: HOLD | Target Price: 6.50 |
Stock Name: MAXIS
Company Name: MAXIS BERHAD
| Research House: HLG | Price Call: HOLD | Target Price: 5.54 |
Power (Neutral)
Remain Burdened by Gas Issue
'''' Expect Malaysia Power demand to increase by 4.0% in 2012, underpinned by 4.5% GDP growth.
'''' Tenaga is expected to continue burdened (~RM3.3bn) by high alternative fuel cost, until Melaka regassification facility commences by Aug-Sept 2012.
'''' Unclear fuel cost pass-through mechanism (as tariff revision schedule remain uncertain while final decision on the rat still within government's hand) continue to drag Tenaga.
'''' No more PPA renegotiation (direct negotiation), where all new PPAs will be awarded through tendering system, will'' give advantage to Tenaga and disadvantage to YTL Power.
'''' We are maintaining our Neutral rating on the overall power sector, given Tenaga's larger market captialization vis-a-vis YTL Power. Maintain Buy on YTL Power with lower TP of RM2.23 and Hold on Tenaga with higher TP of RM6.50.
''
Maxis (HOLD)
Sukuk and Broadband Tax Incentive
'''' In a filing to Bursa Malaysia, Maxis proposed to establish an Unrated Islamic MTN Programme with an aggregate value of up to RM2.45bn and tenure of 30 years from the date of first issue of the sukuk.
'''' First issuance of the sukuk is for RM2.45bn with maturity of 10 years for refinancing (RM1.45bn), CAPEX / working capital and other general purposes (RM1bn).
'''' Similar to DiGi, Maxis also announced that it enjoys last mile broadband tax incentive of total RM320m.
'''' Comments: The consolidated gearing will increase from 0.63x to 0.75x on proforma basis, based on 2010 audited accounts.
'''' The tax benefit is perceived to be positive to Maxis relieving NGBB's front-loaded high CAPEX and cost. After some channel checking, Maxis NGBB business is not "flying" as Maxis has only managed to secure about 4,000 subscribers to date.
'''' Tax incentive of RM97m for 9M11 translates into 23% effective tax rate (vs assumed tax rate of 26%) and directly boost earnings for FY11. We have assumed 23% for FY12 and FY13 as well.
'''' Tax credit in respect of prior years is assumed to further reduce tax by RM44.6m for FY12-FY16.
'''' Updated forecast with above mentioned assumptions. As a result, EPS for FY11 to FY13 are revised upward by 8.8%, 4.1% and 1.2% respectively.
'''' We upgraded our DD-derived TP by 2.8% to RM5.54 from RM5.39 with WACC of 7.5% and TG of 0%.
''
Tradewinds Plantation (Buy; TP: RM5.04)
Disposes stake in rubber trading house
'''' TWS Plant disposed its 45% stake in R1 International Pte Ltd via Mardec (a wholly-owned subsidiary) for US$25.9m (RM79.1m).
'''' TWS Plant expects RM38m gain from this disposal.
'''' Positive, as the disposal releases Mardec from its existing contractual obligations to trade exclusively through R1, and allows Mardec to unlock its value of its investment in R1.'' We note that the disposal is in line with TWS Plant's strategy in Mardec, i.e. to improve its plant' utilization rate and procurement efficiency.''
'''' TP maintained at RM5.04 (based on 11x 2012 FD core EPS of 45.8 sen). Despite the potential total return of only 9.3%, we are keeping our BUY recommendation on the stock for now.
''
KLCI: Crucial 1550 level''
'''' Overnight Dow's rally is expected to lift our market to stay above the crucial 1550 psychological support This level is crucial for sustainability as a close below would likely confirm a reversal and send the index back towards lower supports near 14-d SMA (1542), mid Bollinger band (1535) and 30-d SMA or uptrend line at 1529.
'''' Immediate resistance levels are situated at 7-d SMA (1560), 15 Feb's high of 1567 and upper Bollinger band (1574).
''
OLDTOWN: More upside if 30-d SMA resistance is broken''''''
'''' The pullback from 52-wk high of RM1.40 (July 2011) appears to be at its tail end, as prices have been consolidating above the 50% FR (RM1.14), supported by its oversold slow Stochastics. Further strong support can be found near 38.2% FR (RM1.08) and RM1.00 (23.6% FR).
'''' Buyers may start to nibble as hourly chart indicators are showing signs of bottoming up. A strong breakout above 30-d SMA (RM1.26) will spur greater upside towards RM1.32 (upper Bollinger band) and RM1.40. Significant resistance is 123.6% FR at RM1.52. Cut loss below RM1.13.
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