Barisan Nasional eletion victory to see power sector reforms continue

TENAGA NASIONAL BHD
National power utility Tenaga Nasional Bhd (TNB)
added 4.8%, or 39 sen, to RM8.17 on a hefty volume of 31.6 million
shares, reaching its highest price since 2007. With the incumbent
Barisan Nasional (BN) coalition retaining government, reforms in the
power sector, ongoing since 2011, are set to continue.
And TNB,
analysts concur, will be the biggest winner among domestic power
players now that the firm can go ahead with its long-discussed fuel
cost pass-through mechanism.
PublicInvest Research noted that
fluctuations in gas prices would remain earnings-neutral to TNB, as
promised by the Government, until the fuel cost pass-through mechanism
is implemented.
“This will be done either through a direct pass
through via adjustments to the electricity tariff, as gas prices are
adjusted upwards every six months, or through a stabilisation fund.
“We
understand that the group is already in talks with the Government
regarding details of setting up the latter, and believe that with the
election uncertainty out of the way, progress on the discussion would
be expedited so as to resolve the issue before the Sungai Udang
regasification terminal commences operations,” Public Bank's research arm said.
An
expansion in electricity supply is also on the cards, after the BN
promised to expand the supply of electricity to another 6,000 homes in
Peninsular Malaysia, 60,000 in Sabah and 80,000 in Sarawak in its
election manifesto, signifying additional revenue sources for TNB.
“While
household consumption of electricity remains low compared with the
commercial and industrial sector, growth from this segment remains the
highest among all at 7.4% as at the first half of 2013,” PublicInvest
Research said.
In addition, TNB has been shortlisted to bid for
the two coal-fired power plant tenders floated by the Energy Commission
for a greenfield 2,000MW and 1,000MW brownfield facility. The results
of the tenders are expected by the second half of the year.
TNB
has been touted as a frontrunner due to its experience in coal-power
generation, compared with other independent power producers whose
plants are chiefly gas-fired.
“Given that TNB's power grid
remains the only off-taker for new power plants, we continue to view
the group as the favourite to secure new open tenders, and the
competitive bids will drive down its fixed power generation costs even
if the national utility does not secure the tenders,” AmResearchsaid.
“With
foreign shareholding at 19% as at end-March this year versus its peak
of 28% back in 2007, the stock still trades at an attractive
price-to-book of 1.2 times at the lower range of an adjusted 1.1 times
to 2.7 times over the past five years.”
Valuation-wise, TNB offers an “attractive” forward price-to-earnings of 11 times, AmResearch said.
GAMUDA BHD
This
politically well-connected stock saw its shares jump 8.4% or 37 sen to
RM4.41, a level not seen in six years, with 48.2 million shares
changing hands.
According to CIMB Research,
Gamuda stands out as the “biggest beneficiary” of the rollout of the
second and third lines of the Klang Valley mass rapid transit (MRT),
known as the circle and radial alignments, considering its role as the
project delivery partner for the above ground portion of the first line
of the MRT, stretching from Sungai Buloh to Kajang, as well as the
contractor for the underground tunnelling portion under its MMC-Gamuda
joint venture.
The firm, helmed by industry veteran Datuk Lin Yun Ling,
is also eyeing RM10bil worth of jobs over the next 12 months, besides
having reportedly thrown its hat into the ring for the
Malaysia-Singapore high speed rail (HSR), which has an indicative price
tag of some RM40bil, including rolling stock. Furthermore, Gamuda has
been linked with the long-delayed RM7bil Gemas-Johor Baru electrified
double-tracking project, after it bagged a similar contract for the
Ipoh-Padang Besar track, scheduled for completion in 2014.
CIMB
Research also estimates that some RM9bil worth of rail-related tenders
may be called from 2014, possibly re-rating construction stocks. The
total value of the contracts may be in the region of RM70bil, its
calculations show.
“These jobs will be positive for the sector
over the longer term. Screening through all the recent major rail
projects that will drive sector activities from end-2013 including the
MRT 2 and 3, KL-Singapore HSR and JB-Singapore Rail Transit System what
is clear is that most of the projects are targeted to start works in
2014.
“This also suggests that the tender and award phase would only start towards the later part of 2013,” the brokerage said.
It
added that the value of the rail projects to be dished out in 2013
could dip, as most jobs in the pipeline have yet to gain approval.
“This
means that 2014 could turn out to be a recovery year, as earlier
packages for the MRT would have been awarded by then,” CIMB Research
said.
UEM LAND HOLDINGS BHD
UEM
Land Holdings Bhd, the largest landowner in Johor's Iskandar region,
settled at RM2.98, 11.4% or 34 sen above Friday's close a two-year high
with 60 million shares traded.
With the polls out of the way,
the property sector's most pressing concern has been lifted, and both
institutional funds and retail investors are likely to take a position
in higher-beta and cyclical stocks such as property.
Investors
looking to do so will not be able to overlook UEM Land, which has a
staggering 4,451ha of land in the thriving Iskandar area with a gross
development value of RM31bil.
Analysts believe UEM Land remains
the “best proxy” to Iskandar because of the firm's massive landbank in
Nusajaya and the numerous catalyst projects taking place there, coupled
with risng property prices and land values.
“Also, UEM Land is the flagship property arm of Khazanah Nasional Bhd
the planner and driver of Iskandar. The group's newest project in
Nusajaya is its 1,821ha Gerbang Nusajaya, which is set to rival even
Puteri Harbour as its flagship project.
“There was a flurry of
announcements in Gerbang Nusajaya in the fourth quarter of last year,
starting with the 40:60 joint venture with Ascendas Land to develop an
RM3.7bil 210ha integrated technology park,” CIMB Research said.
PublicInvest
Research also noted that the recent interest shown in Iskandar has been
encouraging, amid sold-out projects and land deals involving reputable
individuals and firms.
CIMB GROUP HOLDINGS BHD
CIMB
Group Holdings Bhd's rally yesterday came as no surprise, given its
connection to incumbent Barisan Nasional's win in the 13th general
election (GE13). Most research houses have upgraded the stock to a
“buy”.
Although this year remains a challenging one for the
banking sector, with the gradual implementation of the Basel III
requirements, the conclusion of GE13 should remove the political risk
overhang.
Malaysian banking stocks have lagged against regional
peers in terms of share price performance, moving upwards by a marginal
3.7% year-to-date. Regional banking stocks such as Indonesia's big-cap
banks were up 23% on average year-to-date, while large Thailand banks
and Singaporean banks were up about 14% to 15% year-to-date.
The
counter rose 74 sen yesterday to RM8.35, its highest since mid-August
2011. CIMB shares were heavily traded, making it one of the top-10
stocks based on volume, with 74.33 million shares being traded.
Alliance
Research banking analyst Cheah King Yoong believes that post-GE13, CIMB
serves as the best proxy to capitalise on the expected relief rally, as
the external risks and domestic political uncertainties subside.
Despite
its strong fundamentals, being a prime beneficiary of the Economic
Transformation Programme-related loans, and its exposure to the Asean
region, CIMB has been a laggard relative to its domestic banking peers
in the past year.
“We believe that such relative share underperformance was mainly dragged by persistent external risk,” he said.
Additionally,
Cheah said that CIMB was highly vulnerable to an increased market risk
premium leading up to GE13, particularly in view of its high foreign
shareholdings.
RHB Research
said it sees the stock as a key beneficiary from the removal of the
political overhang and expects a strong catch-up in performance ahead.