Affin Daily Insight (LV) - 3 April 2014 - UTILITIES / DMR / MN

Top Calls

Sector Update - Utilities (OVERWEIGHT, maintain) - A look into the optimal fuel mix and security of supply Against a backdrop of a 4.5-5% organic electricity demand growth (official estimates), Malaysia’s power plant up cycle will resume with Energy Commission (EC) opening competitive bids for Track 4 by 2Q14E. Also, there could be a shortfall in capacity in 2018 and this may result in the regulator inviting 1st Generation IPPS to bid for short-term contracts (either 6 months or a year) to supply electricity to the grid. Finally, there could be potential open bidding for Track 4B (1,000MW gas-fired greenfield power plant) by end 2014/ early 2015. All in, we are positive on the next planting up cycle and see emerging opportunities for the 1st Generation IPPs to come back to the table and bid for short term contracts. Based on a project IRR of 8%, Track 4A could yield an equity value of RM560m. This could lift Tenaga, YTLP and MMC’s fair value by 0.7%, 3.3% and 2.6%, respectively.

Other Calls

Debt Market Research -Steepening on upcoming SPK auctions and US NFP

Morning News & Market Summary

For important disclosures, please refer to the Disclosure section at the end of the individual linked research reports.

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