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BIMB Research maintains "Buy" call on TNB, target price RM8.96
Affin maintains "Underweight" on tobacco sector after price hike
KLCI opens lower, Sime, Tenaga weigh

BIMB Research maintains "Buy" call on TNB, target price RM8.96

Posted: 06 Jun 2013 07:09 PM PDT

KUALA LUMPUR: BIMB Securities Research is maintaining its "Buy" call on Tenaga Nasional Bhd (TNB) at a target price of RM8.96, backed by its positive expectations on the sector reform and foreign buying interests.

BIMB said during the last five years TNB had spent a RM25.5bil in capital expenditure across its major business segments and expects the annual capex to grow.

"Management has previously guided for assets maintenance alone, it will require between RM4bil to RM5bil a year," it said.

It added TNB's foreign shareholdings have been historically volatile and rose in tandem with the increase in share price.

"Between Aug 2003 and March 2013, foreign shareholdings in TNB peaked at 28.3% (April 2007), latest figure indicated foreign content is around 18.7%, second highest level since May 2008, a sign that foreign interest has returned and could be one of the good explanatory factors for its strong share price performance over the last 12 months," it said.

BIMB also noted its current transformation efforts within Peninsular Malaysia's electricity supply industry could transform the TNB's financial profile significantly and likely to trigger subsequent stock re-rating by the market.

"Given the group's on-going capacity expansion programmes which represent 73% of all on-going plant up exercise in Peninsular Malaysia, we expect the group to retain its dominance in the generation segment. TNB's power generation output makes up of 43%-46% of Peninsular Malaysia's output," it said.

However, BIMB noted that natural gas, used to meet its power demand, is expected to come short in the second half this year.

"While the average gas supply has improved, we recognize the power sector's natural gas demand and supply balance remains weak," it said It said while previous attempts to import energy from Sarawak have been shelved, the Energy Commission said Sarawak is expected to contribute 2GW of supply to the Peninsular Malaysia in 2021.

While economic to import electricity from Sarawak is yet to be established, we understand that technically it is viable to implement. "Given the expected increase in overall generation cost in Peninsular Malaysia due to hikes in fuel costs, importation of electricity from Sarawak could gradually become a viable solution. Additionally, interconnection between Sarawak and Peninsular Malaysia is also crucial for the greater Asean power network," it said.

Affin maintains "Underweight" on tobacco sector after price hike

Posted: 06 Jun 2013 06:30 PM PDT

KUALA LUMPUR: Affin Research is maintaining its "Underweight" call on the tabacco sector, following the price increase and sluggish growth.

It is also maintaining its "Reduce" recommendation on both British American Tobacco Malaysia Bhd (BAT) at a target price of RM61.66 and Japan Tobacco International Bhd (JTI) with a target price of RM6.60.

"Recently, industry leader BAT raised its average selling price by 30 sen per pack, brought by inflationary pressure. We forecast BAT's financial year 2013 volume sales to decline by 6.9% on-year to 8.1 billion sticks, with its flagship Dunhill's market share shrinking by 1.3% points to 46%. On the same token, we project BAT's net profit to fall by 7% on-year," it said.

Affin said BAT claimed the high level of illicit trade, currently at 34.5% has negatively impacted its total industry volume hence the increase in its cigarette price to protect its margins.

It said illicit cigarettes had grown since 2008 due to prices as low as RM3.50 per pack.

"We reckon that this is the main concern to the industry. Even with the absence of excise duties hike in 2011-202, illicit white cigarettes has continue to grow by 3.6%-4% on-year," it said.

It added if JTI and Philip Morris International (PMI) were to follow suit in the price hike, Affin believes that both JTI and PMI will gain market share at the expense of BAT and would likely record better volume sales and net profit growth in 2Q13 compared to BAT.

"While we are uncertain whether both JTI and PMI will follow suit and raise their average selling price, based on historical price trends, a prolonged disparity in selling prices among cigarette brands had never existed," it said.

It noted the sector will continue to be "haunted" by negative newsflow, high prices and the government's implementation to discourage smoking,

KLCI opens lower, Sime, Tenaga weigh

Posted: 06 Jun 2013 06:21 PM PDT

Published: Friday June 7, 2013 MYT 9:21:00 AM

KUALA LUMPUR: Malaysia's key FBM KLCI opened lower on Friday, weighed down by some mild selling of heavyweights Sime Darby and Tenaga Nasional as investor sentiment remain cautious following the fall in Japanese equities.

At 9.01am, the FBM KLCI was down 0.76 of a point to 1,786.84, extending Thursday's decline when the index closed 4.82 points down. Turnover was 27.25 million shares valued at RM15.91mil. There were 117 gainers, 31 losers and 84 counters unchanged.

BIMB Securities Research believed the selling might continue on Friday ahead of the release on the US unemployment data today with the immediate support at the 1,760 level.

Sime Darby fell 14 sen to RM9.35 and Tenaga three sen lower to RM8.22.

Lafarge Cement and Public Bank foreign lost eight sen each to RM10.90 and RM16.90.

Petronas Chemicals and Dialog fell four sen each to RM6.60 and RM2.90.

Kredit: www.thestar.com.my

Khamis, 6 Jun 2013