STOCK FOCUS OF THE DAY
Tenaga Nasional: Constructive disclosures by the Energy Commission BUY
The Energy Commission (EC) held a briefing on the parameters underlying the Regulatory Period 2 (RP2: 2018-2020) under the Incentive-Based Regulation (IBR) mechanism. The briefing allays potential concerns on the funding source over Tenaga’s support programmes. Meanwhile, excess collection gained over the RP1 should buffer under-recovery of fuel cost in the interim. Maintain BUY with a DCF-based FV of RM17.82 (WACC: 7.7% terminal growth: 2.0%).
Among the key takeaways are: i) the electricity base tariff rate of Regulatory Period 1 (RP1: 2015-2017) remains unchanged at 38.53 sen/kWh heading into RP2; ii) the RP1’s base tariff rate resulted in an average selling price of 39.45 sen/kWh; iii) the RP2 regulatory return on Tenaga was revised to 7.3% from 7.5%; iv) the EC revised the fuel coal price benchmark to US$75/MT from US$87.50/MT or RM315.90/MT; v) the under-recovery of fuel cost will amount to RM929mil for the period 1 Jan 2018—30 June 2018.
Others :
Telekom Malaysia: MoU with Tenaga may mitigate broadband showdown BUY
V.S.Industry: Buying opportunities amid misconception BUY
UMW Oil & Gas: Uncertainty remains with HWU utilisation SELL
STOCKS ON RADAR
V.S.Industry, SKP Resources, Formosa Prosonic Industries, ViTrox Corporation
ECONOMIC HIGHLIGHT
UK: Post-Brexit impact on inflation softening?
NEWS HIGHLIGHTS
D'nonce Technology: D’nonce a takeover target?
EWI: Achieves cumulative sales of RM7.7b from UK, Australian projects
Sime Darby Property: To launch 1,000 affordable units this year
Ewein: Says it’s not involved in Penang job
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