Tanjong Plc - Defensive EPS

Tanjong Plc BUY

Price target RM16.70

Share price at 12 Dec RM13.50

Investment summary

Last week, Tanjong reported a poor set of Q309 results, which were ~5% lower than expectations due to one-off kitchen-sinking expenses. However, we remain bullish on Tanjong: (1) +6% EPS CAGR over FY08-10E from the Globeleq IPP acquisition, which is superior to growth rates at other Bursa-listed power/ infrastructure stocks. (2) Tanjong’s earnings are highly defensive to the current global recession (50-60% is derived from Malaysian IPP/gaming), and could potentially benefit from USD appreciation and falling interest rates. (3) Valuation multiple expansion due to the potential long-term spin-off of Tanjong’s power division and the local investment vacuum created by the Malakoff de-listing.

Fundamental trade
In a sideways market, along with Resorts, we think Tanjong is a fundamental trading opportunity: (1) liquid/ wide 2-mth trading band of RM10-14/share; (2) defensive earnings profile, and USD beneficiary.