Energy Stocks- a power shift developing?

The two main stocks in the energy sector is Tenaga & YTLPower. The two charts below tell the tale of two very different entities. One the victim of political exigencies, the other the benefactor of political largesse. This reminds me of the story of EON and Proton in early 2000. EON always made money and Proton always lost money. The reason: one is living off the other. I told my research analyst that the easiest solution is for the government to cause Proton to takeover EON or to distribute the Proton cars on its own. The analyst did not think that was possible. That was what happened when Proton set up Proton Edar to distribute its cars & cut off EON from that business.

Today, the government must re-examine the PPAs in order to lower the cost of power that Tenaga acquired from the IPPs. Until then, Tenaga will forever be the loser & the IPPs the winner in this business arrangement. Because of this lop-sided arrangement, Tenaga has to charge the consumers a higher price for power consumed.

Notwithstanding the above commentary, we can see that Tenaga should have support at the psychological RM5.00 level. If that level is breached, the next support is at RM4.00. YTLPower is still in a long-term uptrend line, with support at RM1.80.

Author: Alex Lu