Malaysia Daily Bulletin – 07/01/13

Local Power Sector Expected To Draw Some Attention
Investors are expected to show some interest to the local power sector this year following the potential revision in tariff, re-listing of Malakoff Corporation and tenders for new power plants. The impending tariff review has drawn many investors’ interest since it was announced in the beginning of mid-2011. However the government has decided not to approve any revisions in tariff until June this year. Hence, a revision will only be materialised after the general elections, together with the resumption of the rollback in gas subsidies. Besides that, the re-listing of Malakoff, the country’s largest independent power producer and a 51 percent subsidiary of MMC Corporation, could re-rate the opportunities for the existing industry players, if MMC could attract a high listing premium. Furthermore, the near completion of Petronas Gas Bhd’s regasification terminal (RGT) in Sungai Udang, Malacca, would allow varies players to import LNG for the domestic market, thus alleviating the country’s energy supply challenges.

Significance: There would be a strong power demand growth from the rollout of mega projects under 10th Malaysia Plan as well as the Economic Transformation Programme. Hence the growth for electricity consumption in 2013 is projected at 4.5 percent, MIDF Research said.

Cautious Outlook For Palm Futures
Crude palm oil (CPO) futures prices are expected to float between RM2,000 and RM2,300 per tonne this week on Bursa Malaysia Derivatives. It is expected to trade on cautious ground. According to Interband Group senior palm oil trader Jim Teh, traders were concerned about the high stock inventory of 2.56 million tonnes in November, and it is likely to be higher at over 2.58 million tonnes in December due to lower exports. “Market players were anxiously awaiting the release of December production figures, early this week, by the Malaysian Palm Oil Board,” he added. Recently the government imposed a new export tax structure, set at zero percent. However it has not shown any impact yet, and would probably take about three months for the new policy to see any results. For the week just-ended, CPO prices traded volatile throughout the week due to bearish export data, strong demand prospects from the region and profit taking.

Significance: The revised CPO export tax, which has made Malaysia’s cargoes cheaper than Indonesia, the top producer in the region, was intended to spur demand for the golden crop.

TCM’s Topline To Surge In Line With Almera Launch
With anticipation of strong sales of the Almera model, the topline of Tan Chong Motor Holdings (TCM), the sole distributor of Nissan cars in the country; is expected to achieve another milestone. According to AmResearch, Nissan’s January sales are expected to be on track to test a record high of over six thousand units, which is based on the indicative invoicing of the Almera’s ballooning booking bank. TCM had launched its first B-segment model, the 1.5L Almera in Malaysia early November last year and recorded 2,500 unit sales. The results were a massive gap-up compared with the 11-month of 2012 average monthly Nissan total industry volume (TIV) of 2,934 units, and November Nissan TIV of 4,476 units, therefore overtaking Honda to become the second largest non-national car seller, the research house added. “TCM is now our top sector pick replacing UMW Holdings because having underperformed sector peers and the index significantly, the stock is relatively under-owned amid a sharp turn in earnings cycle.”

Significance: In view of the strong order book record of sales, AmResearch has increased TCM’s projection by 2.1 percent to 2.5 percent over financial year 2013 (FY13) and FY14. It is also anticipating Nissan to knock record-high sales volume this year of 50,000 units.