RHB Equity 360° (TNB, AirAsia; Technical: Berjaya Corp) - 09/06/2010

Top Story : TNB – Back to basics – Focus on demand Outperform Visit Note - With respect to the recent subsidy restructuring proposal by Pemandu, management stressed that the impact is expected to be earnings neutral, although this would depend on the level of demand. - Based on the gas allocation of 1,250mmscfd to the power sector, we estimate the initial hike in gas price could see gas cost increase by RM5.93m/day. This increase, however, would be roughly matched by the incremental revenue of RM5.85m/day from the electricity tariff hike of 2.4 sen/kWh. With gas allocation capped at 1,250mmscfd, thus, the main variable would now be demand. - Meanwhile, demand continues to remain firm. Apr unit sales surged 18.3% yoy (Mar ’10: +11.7% yoy) while YTD (Sep ’09 - Apr ’10) unit sales growth stood at 9.7% yoy. Going forward, while we expect electricity demand to remain healthy, the growth rate would likely moderate as demand would now be coming from a higher base. - With plans to import electricity from Sarawak and the undersea cable project unlikely to materialise, capacity expansion at Manjung (by another 2,000MW) is set to take off. If all goes well, tenders for the project could start to go out next year. - No change to forecasts. Fair value of RM10.40 is based on unchanged target CY10 PER of 14x. Maintain Outperform.