AmWatch: STOCK FOCUS OF THE DAY

STOCK FOCUS OF THE DAY
Tenaga Nasional : Lighting up on lower costs BUY

We reiterate our BUY call on Tenaga Nasional Bhd (Tenaga) with a higher DCF-based fair value of RM8.00/share. We remain positive on Tenaga due to: (1) Move towards a more transparent tariff mechanism, (2) Government’s continued affirmative stance towards the national utility; and (3) Its high stock liquidity with strong local institutional support. Tenaga’s 1HFY09 core net profit of RM1,289mil - excluding forex losses of RM1.6bil - was above expectations mainly due to: (a) Lower coal consumption in tandem with contraction in unit demand; and (b) 50% lower capacity charge from its 1,400MW coal-fired Jimah power plant. Annualised, 1HFY09 core net profit was 30% above our FY09 forecast and 28% above consensus estimates. Tenaga declared an interim dividend of 4.7 sen, half of 1HFY08 DPS. We have raised FY09F-FY11F earnings by 7%-17% due to lower coal costs and Jimah capacity payments. As such, we are raisingTenaga’s DCF valuation from RM7.80/share to RM8.00/share due to higher cashflows, on an unchanged terminal growth rate of 4.5%. Valuation-wise, Tenaga currently trades at an attractive CY10F PE of 9x.

Others :
Axiata Group : Balance sheet to ease, potential growth markets BUY
Economic Update : Singapore NODX falls slower, but government revises full-year projections lower

QUICK TAKE
Proton Holding : Najib: Proton needs to get more serious BUY

NEWS HIGHLIGHTS
MAS :Launches stimulus package/Firefly to fly Ipoh-Singapore route
With RM3.57bil surplus cash eyeing to buy another airline
BCHB : Redemption of USD$100mil 5% Subordinated bonds
Sime Darby : Sime healthcare arm partners Viet firm
Financial Services : Islamic banks to adopt standardised master agreements