Analyst calls for July 17
KUALA LUMPUR, July 17 — This is a selection of morning calls by local research houses for the day.
From RHB Research Institute
TNB
As the gas supply situation worsened in 3Q, we expect a decline in earnings q-o-q mainly due to higher fuel cost. We estimate 3Q core net profit of RM300-400 million. This would bring 9MFY12 core net profit to RM1.17-1.27 billion or 54-58 per cent of our full year estimate.
The use of oil and distillates rose sharply in Apr and May, as disruptions in the Malaysia-Thailand Joint Development Area (MTDJA) meant Petronas supplied only around 1,000 mmscfd (1,150 mmscfd required to avoid burning distillates). TNB is due to release its 3QFY12 results on 19 Jul.
Although gas supply had begun to normalise after Petronas began pumping in an additional 70 mmscfd from the MTJDA in Jan; by Apr we gather that production issues meant TNB was no longer receiving gas from the MTDJA.
We gather that TNB will likely recognise RM465m compensation in 3QFY12 for alternative fuel burnt from Nov 2011 to Feb 2012. We have not imputed this figure into our FY13 earnings forecast, as we treat the item as non-core.
We estimate 3Q electricity unit sales increased 4.4 per cent y-o-y. For 9MFY12, this implies electricity unit sales growth of 4.3 per cent. This is within management’s guidance and our forecast of 4-5 per cent and 4 per cent demand growth respectively for FY12.
Due to continued disruptions in gas supply, we expect alternative fuel costs to double q-o-q. This will be partially mitigated by marginally lower coal costs, while the RM strengthened marginally by 0.9 per cent q-o-q to RM3.07/US$. We expect coal consumption to remain largely flat at 5 million MT q-o-q.
Risks include: 1) longer-than-expected gas supply disruption; 2) no subsidy for imported LNG; 3) lower-than-expected demand growth; 4) weaker RM; and 5) rise in coal prices.
No change to our Outperform call on TNB and fair value of RM7.60 based on unchanged target FY13 PER of 15x (8-year average is 17x) and EPS of 50.8 sen. While 3Q results will likely be below expectations, short-term sentiment on TNB should remain intact with the fuel cost sharing mechanism in place until Sep. This ensures shortfalls in core earnings due to alternative fuel use will be compensated by two-thirds from the Government and Petronas collectively. We remain optimistic for
TNB on LNG pricing from the Malacca LNG regasification plant, as the Government has consistently shown that any changes to gas pricing will have an earnings neutral impact to TNB.
From HwangDBS-Vickers
The key FBM KLCI – which has climbed 41.7-point or 2.6 per cent over the past 12 days to close at a new all-time high of 1,635.96 yesterday – could pause for a breather soon. If so, then the benchmark index is expected to back off slightly from its immediate resistance line of 1,635 ahead.
Essentially, buyers may want to take a break in the absence of fresh positive catalysts. Last night, major US equity indices slipped between 0.2 per cent and 0.4 per cent as disappointing retail sales had caused concerns over the recovery pace in the world’s largest economy.
Back home, the following counters will probably attract investors’ interests today. Media Chinese International would be rewarding its shareholders with a special dividend amounting to RM0.41 per share. Meanwhile, Puncak Niaga (which holds a 70 per cent stake in Syabas) may be in the limelight after the Selangor state government said it wants to take over the management of the water supply and distribution company. Separately, OCK Group will be making its debut listing on the ACE Market this morning.
From OSK Research
MEDIAC
Media Chinese yesterday proposed to undertake to distribute RM700 million via a proposed special dividend to its shareholders, or about RM0.41 per share. Of the entire proposed sum, RM200 million will be funded internally while the remaining RM500 million will be financed by bank borrowings. Maintain BUY, with fair value adjusted to RM1.86 based on an unchanged 13x of FY13 PER.
MSC
We think MSC still justifies our BUY recommendation, with its FV remaining unchanged at RM5.50, based on: (i) its sound and solid fundamentals, with the right strategies taken to strengthen its position, (ii) relatively cheap valuation compared to its closest peers, (iii) our conservative valuation applies a 11.6 per cent DCF discount rate (which is double the company’s WACC), and (iv) we have incorporated the worst-case scenario of PT Koba Tin not getting the extension on its CoW.
* These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.
