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Top Calls
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Sector Update � Utilities (OVERWEIGHT,
maintain)
- Power regulatory reform will boost Tenaga�s earnings The Malaysia power sector is undergoing a regulatory reform to: (1) provide equitable returns for Tenaga; and (2) reduce the Government�s subsidy to the power sector by reviewing the electricity tariff to reflect true costs. Thus, the Incentive-based return (IBR) framework builds on the concept of efficiency through incentives and penalties. Setting the wheels in motion, the government has announced a 4.99 sen or 14.9% electricity tariff hike effective 1 January 2014. Importantly, we expect the first FCPT review to be announced by June 2014. This is a re-rating catalyst for Tenaga. Key focus for the sector: (1) the �initiation� of a fuel-cost-pass-through for Tenaga; (2) the Government�s continued commitment to gradually reduce the gas subsidy; and (3) the potential listing of 1MDB by year-end and Malakoff�s power assets by early 2015. Maintain OVERWEIGHT given positive regulatory framework. Tenaga (BUY; RM14.70 TP) is a key top pick for Affin.
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For
important disclosures, please refer to the Disclosure section at the end of
the individual linked research reports. |
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