BILLIONS OF OUR MONEY WASTED BY BARISAN NASIONAL

MIDF PROFILE

Spanning over five decades of contributing to the country’s economic growth, Malaysian Industrial Development Finance Berhad (MIDF) today has strengthened its foothold in many segments of the financial services industry.

MIDF was incorporated on 30 March 1960 mainly for the purpose of ensuring access to financing for manufacturing-based small-and-medium enterprises (SMEs) as part of Malaysia’s strategy to expedite the industrial sector development. From boasting the status as Malaysia’s maiden development finance institution, MIDF has over the years transformed into a diversified group.

Following its merger with Amanah Capital Partners Berhad in 2003, the acquisition of Utama Merchant Bank Berhad (UMBB) in 2004, and the establishment of MIDF Amanah Investment Bank Berhad (MIDF Investment) in 2006, the MIDF Group accentuated its ambition to become a leading financial services provider in three core business areas, namely investment banking, asset management and development finance.

A subsidiary of Permodalan Nasional Berhad (PNB), MIDF has total assets of over RM9 billion and shareholders’ funds of over RM2 billion.

steadyaku47 comments:

The following is a damming report by MIDF on the major failures of Mahathir's privaisation policies which has burden the rakyat and our country for decades past and will continue to do so for decades to come. We all know too well that these failures are due to the interest of crony/self/family/party-interest being put first before rakyat/national-interest!
The report is dated 2009 but it is an accurate assessment of the situation our country is now in.

KDN: PP 10744/04/2009

KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION ON IMPORTANT DISCLOSURES

MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).

(Bank Pelaburan)

(A Participating Organisation of Bursa Malaysia Securities Berhad)

10 February 2009

Company Update

Tenaga Nasional NEUTRAL

Manageable cut in tariff TP: RM6.20

Price ( 6 Feb 09) RM5.75

Stock Data

Bursa / Bloomberg 5347 / TNB MK

Board / Sector Main / Trading

Syariah Compliant Yes

Issued shares (mil) 4,334.7

Par Value (RM) RM1.00

Market cap. (RM’m) 24,924.2

Price over NTA 0.98

52-wk price Range RM5.60 / RM9.40

Beta (against KLCI) 0.79

3-mth Avg Daily Volume 4.4m

3-mth Avg Daily Value^ RM25.1m

^ based on closing price

Major Shareholders

Khazanah Nasional 37.8%

EPF 15.6%

Skim ASB 8.9%

Daily Chart

Source: Bloomberg

The government is expected to announce the decision on the reduction in

electricity tariff this week. The reduction is inevitable but the question is

how to balance the tariff reduction on the cost-side. Based on reliable

sources, we expect a reduction of around 6.5% to bring down the average

tariff to 31 sen/kWh from 33 sen/kWh currently. As for cost, one possibility

is that Petronas could revise down their gas prices by about 10% to

RM12.88 per mmbtu. As for coal, TNB may push for a higher coal reference

price from the current US$75/MT. Maintain NEUTRAL pending full

disclosure.

Status quo. Electricity tariff was last increased on Jul 1, 2008. Tariff for

consumers using 201 to 400 Kwh per month which represents 26.7% of total

households was raised by 1% to 10%. Commercial and industrial users faced an

average increase of 26%. Gas price supplied by Petronas was increased from

RM6.40 per mmbtu to RM14.31 per mmbtu. Gas accounts for 62% and coal 31%

of TNB’s fuel costs.

A rate cut with a lower gas price? Based on reliable sources, we believe that a

reduction of about 6.5% to 31 sen/kWh from 33 sen/kWh will be announced

sometime this week or next. For that quantum of reduction, Petronas may be

asked by the government to reduce its gas selling price by about 10% to RM12.88

per mmbtu from the current price of RM14.32 per mmbtu, which is already at a

discount to the market of about RM20 per mmbtu.

Further tariff review in June. There will be another tariff review this June which

is consistent with the comments made by TNB that it will go ahead with the review

of base tariff come Jun 09.

Neutral impact to bottomline with KPI maintain. Taking this tariff reduction in

isolation, we expect it to have a Neutral impact to TNB’s earnings prospect.

Another positive is that TNB is pushing a higher reference price for coal, which

currently at US$75/MT. A higher reference price would allow TNB more room to

maneuver in lobbying for future tariff adjustments. As for the KPI, TNB will

maintain its ROA of 2.8% for FY09, translating into a potential earnings of

RM1.9b.

Maintain NEUTRAL. Pending full detail announcement, we are maintaining our

number and valuation at RM6.20 per share. Chart wise, the stock is on track to

test the resistance at RM6.10. Further pullback would see the price to find support

at the RM5.80 level, failing which the next support is seen at RM5.65. On the

upside, resistance is at RM6.10 followed by RM6.30. Its ability to sustain above

the support levels would be crucial.

Barking at the wrong tree. The biggest thorn in TNB is the high IPP capacity

payment estimated to exceed RM11b for the financial year. With Jimah power

plant to go on stream this year, TNB could incur an additional RM500m to RM1b

IPP payment. This is generally viewed as excessive given TNB current reserve

margin is at nearly 50%. The big question is, why pay extravagantly for something

you don’t need?

MIDF EQUITY BEAT

Tuesday, 10 February 2009

2

A catalyst for the economy. We are looking at several sectors with high multiplier effect that benefit from this tariff

reduction, namely:

Sectors to Benefit

Manufacturing Sector

The costs savings would allow a breathing space for manufacturers

besieged by slower demand growth, thus would ease pressure on margins.

The costs savings would assist reducing the need for staff lay-offs.

Steel Sector

Steel millers are power hungry entities with electricity costs account for an

average 15% of the total operating costs.

Retailers incl. Hypermarkets

Lower costs of doing business would surely benefit domestic consumption

should they are able to pass through the savings to consumers.

TNB: Headline KPI

FY08 FY09e 1QFY09

ROA 4.6% 2.8% 3.9%

Gearing 46.9% 48-50% 49.3%

Unplanned Outage Rate 3.3% 3.5% 2.8%

T&D Losses 9.5% 9.5% 9.6%

Transmission System Min. 6.6 6.5 0.4

Distribution SAIDI 78.0 75.0 75.0

Source: TNB

Selected Key Indicators

MIDF EQUITY BEAT

Tuesday, 10 February 2009

3

DISCLAIMER

This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy,

completeness or reliability of the information contained therein and it should not be relied upon as such.

This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD.

The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. This document may not be reproduced, distributed or published in any form or for any purpose.

MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS

BUY Total return is expected to be > 5% compared with that of an assigned benchmark over the next 12 months.

TRADING BUY Stock price is expected to rise within 3-months after an investment rating has been assigned due to positive newsflow.

NEUTRAL Total return is expected to be between -5% and +5% compared with that of an assigned benchmark over the next 12 months.

SELL Total return is expected to be < 5% compared with that of an assigned benchmark over the next 12 months.

TRADING SELL Stock price is expected to fall within 3-months after an investment rating has been assigned due to negative newsflow.

SECTOR RECOMMENDATIONS

OVERWEIGHT The sector is expected to outperform the overall market over the next 12 months.

NEUTRAL The sector is to perform in line with the overall market over the next 12 months.

UNDERWEIGHT The sector is expected to underperform the overall market over the next 12 months.


MIDF , TNB and IPP - Document Transcript

1. KDN: PP 10744/04/2009 20 January 2009 Results Update TENAGA NASIONAL NEUTRAL Challenging prospect TP: RM6.20 Price ( 08) RM6.05 Tenaga Nasional reported a 1Q09 loss amounted to RM944.1m on the back of higher fuel costs, higher IPP payment and foreign currency translation Stock Data loss of RM1.4b. Margins suffered greatly, down from 40.3% to 21.5% y-o-y. We have made revisions to our FY09 forecast and cut our target price to Bursa / Bloomberg TNB MK RM6.20. Maintain NEUTRAL. Board / Sector Main Syariah Compliant Yes A heavy burden to bear. Excluding the proposed tariff cut, TNB is facing the Issued shares (mil) 4,334.6 burden of a weak RM exchange rates versus the US$ and JPY, against which it Par Value (RM) 1.00 depreciated by 7% and 21% respectively in 1Q09. However, the biggest culprit is Market cap. (RM’m) 26,224.3 the excessive IPP payment which rose by nearly 40% y-o-y in 1Q09 and could exceed the RM11b mark this year after the commissioning of Jimah power plant. Price over NTA 1.06 52-wk price Range RM10.40/RM5.80 Revision in demand growth. Slower demand is envisaged with margin remains Beta (against KLCI) 0.78 under pressure. Demand growth is estimated to be “flattish” circa 1% level for this 3-mth Avg Daily Volume 5.7m financial year as compared with an earlier estimate of a 3%-4% growth. 3-mth Avg Daily Value^ RM34.5m Rising costs. Apart from the 40% rise in IPP payment, TNB is also facing a 128% ^ based on closing price increase in fuel costs, of which coal is the main culprit. The average coal price secured for 1Q09 was at US$113.0/MT versus US$76/MT in FY08. The group is Major Shareholders targeting US$90/MT average for FY09. Khazanah Nasional 37.8% EPF 13.5% The downside risks on TNB would be (i) high capacity payments to IPP; (ii) weaker RM/US$ that would have a negative impact on its foreign debt of about PNB (Skim ASB) 8.9% RM11b as well as the RM costs of coal; and (iii) the possibility that the tariff cut without a corresponding reduction in gas prices. Daily Chart Dividends may take a hit too. Tenaga’s dividend policy is a payout of 40%-60% of its free cash flows (FCF). Given the weaker earnings prospect, indications are that dividend for FY09 may be lesser due to lower estimated FCF. Revised earnings outlook but maintain NEUTRAL. We have revised our net earnings forecast for FY10 to take into account the forex translation loss, the margin squeeze and slower demand growth. Accordingly we have revised downwards Tenaga’s target price to RM6.20 from RM6.80 previously. FYE 31 Aug FY07 FY08 FY09F FY10F Source: Bloomberg Revenue (RM’m) 23,320.4 25,750.6 31,244.2 34,368.1 Operating profit (RM’m) 5,542.7 4,042.0 3,191.8 3,347.5 Zulkifli Hamzah Pretax Profit (RM’m) 4,765.9 3,025.2 1,816.2 2,518.3 Wan Azhar Mustapha Net Profit (RM’m) 4,061.1 2,594.0 1,455.2 2,014.4 wan.azhar@midf.com.my 03-2173 8393 EPS (sen) 93.7 59.8 33.6 46.5 EPS growth (%) 83.70% -36.1% -43.9% 38.4% PER(x) 6.5 10.1 18.0 13.0 Net dividend (sen) 8.6 15.2 7.6 7.6 Dividend Yield (%) 1.4% 2.5% 1.3% 1.3% KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION ON IMPORTANT DISCLOSURES MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad)
2. MIDF EQUITY BEAT Tuesday, 20 January 2009 Tariff cut. The management has stated that any reduction in electricity tariff must be compensated with a corresponding reduction in gas prices. The main issue is whether Petronas would want to reduce its current gas price of RM14.31 per mmbtu which is already at a steep discount to the prevailing market price of about RM21 per mmbtu. Why pay the IPP so much? The biggest thorn in TNB is the high IPP capacity payment estimated to exceed RM11b for the financial year. With Jimah power plant to go on stream this year, TNB could incur an additional RM500m to RM1b IPP payment. This is generally viewed as excessive given TNB current reserve margin is at 47%. The big question is, why pay extravagantly for something you don’t need? TENAGA NASIONAL: 1QFY09 Results Summary Quarterly Results Comments FY Aug (RM’m) 1Q09 %YoY %QoQ Turnover 7,895.0 27.2% 11.4% Y-o-y higher revenue was due to the tariff hike in July 08, while q-o-q performance was undermined by a weaker demand growth at just 1.1% q-o-q. Operating profit 942.4 -44.0% 263.3% The group incurred a significantly higher operating expenses, up 48.9% y-o-y mainly due to: (i) 39.5% higher IPP payment (ii) 128.2% increase in fuel costs (iii) 40.5% increase in staff costs from an average of 6% salary increments and RM52m in back dated salary adjustment from a collective agreement. EBITDA margin was halved, from 40.5% to 21.5% y-o-y. Forex translation loss (1,439.7) -693.9% 398.5% US$ and JPY appreciated 6% and 21% respectively in the quarter under review on a total of RM11b in foreign debts. Forex transaction gain 2.0 -1100.0% -129.4% Associate 7.8 -17.0% -32.2% Pre-tax profit (772.7) -147.0% 180.8% Tax & zakat (168.0) 32.2% 2654.1% Minority interest 3.4 70.0% 112.5% Net Profit (944.1) -162.3% 233.7% Net profit before forex translation loss was at RM495.6m. 1Q09 FY08 FY07 Avg coal prices (US$) 113.9/MT 76.4/MT 45.3/MT The average coal price for the remaining quarters are expected to be lower with an estimated average of US$90/MT for FY09. 1Q09 4Q08 % chg RM/US$ 3.62 3.39 -6.8% We anticipate forex loss to ease in the upcoming quarters with the expectation of US$ and JPY to weaken against the RM/JPY 3.8 3.13 -21.4% RM. Source: Company, MIDF Research 2
3. MIDF EQUITY BEAT Tuesday, 20 January 2009 DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY Total return is expected to be > 5% compared with that of an assigned benchmark over the next 12 months. TRADING BUY Stock price is expected to rise within 3-months after an investment rating has been assigned due to positive newsflow. NEUTRAL Total return is expected to be between -5% and +5% compared with that of an assigned benchmark over the next 12 months. SELL Total return is expected to be < 5% compared with that of an assigned benchmark over the next 12 months. TRADING SELL Stock price is expected to fall within 3-months after an investment rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS OVERWEIGHT The sector is expected to outperform the overall market over the next 12 months. NEUTRAL The sector is to perform in line with the overall market over the next 12 months. UNDERWEIGHT The sector is expected to underperform the overall market over the next 12 months. 3