Tenaga (Hold '')

Heavy Reliance on Oil and Distillate

'''' Below expectation ' Reported 3Q11 core loss of RM447.1m, bringing down 9M11 earnings to RM813.3m (35.1% of HLIB and 34.0% of consensus forecast) due to lower than expected power demand and higher than expected fuel cost.

'''' 3Q11 gas supply dropped to ~900mmscfd, coal-fired plants have been fully utilized, resulting heavy reliance on oil and distillate power generation (6x more expensive vs gas).

'''' Tenaga has submitted proposal to share the higher fuel cost during gas curtailment period between TNB, Petronas and IPPs (similar to 2002-2003).

'''' Negotiating with Petronas for additional 200mmscfd gas supply from Malacca re-gasification facility. Tenaga will implement cost pass through mechanism, should the gas supply is priced on par with market price.

'''' Downgrade to Hold with TP at RM7.10.

''

AirAsia (Buy '')

AirAsia's Japanese Newborn

'''' AirAsia setup new Japan JV, namely AirAsia Japan (AAJ) with 49% effective stakes (33% voting shares + 16% non-voting shares) while the remaining 51% will be held by All Nippon Japan Airways (ANA).

'''' The initial start-up capital is JP''1bn (RM38m) while the authorized capital is JP''5bn (RM190m). The funding will be generated through AirAsia's internal funds.

'''' Based in Terminal 2 of Narita Airport, AAJ is expected to commence operation with 3-4 Airbus A320s by August 2012.

'''' Positive on AAJ to broaden AirAsia existing network and positioning AirAsia as Asia's largest LCC operator.

'''' Initially, AAJ will leverage on AirAsia's existing low cost expertise and strong brand name as well as ANA's existing infrastructure and routes connectivity. (AirAsia X flies only into Haneda Airport).

'''' We expect AAJ to enjoy strong passenger demand due to current low LCC penetration rate in Japan.

'''' Maintain BUY at RM4.24.

''

FBM KLCI - Upside bias amid positive external backdrops''

'''' With the positive developments in tackling the ongoing Europe debt crisis, cautious optimism of approving the debt ceiling limit and encouraging ongoing U.S. reporting season, sentiment is likely to improve in the near term. Immediate resistance levels are 1570 (30-d SMA) and 1576 (mid Bollinger band). A breakout above 1576 will spur index to re-challenge the all time high of 1597 pts. Support levels are 1560 (50-d SMA) and 1555 (lower Bollinger band).

''

Stock to watch ' Genting: Potential technical rebound from oversold position

'''' Selling pressures seem moderating for the last two days amid oversold technical indicators. Crucial support is near RM10.40 (lower downtrend channel). A breakdown below RM10.40 is likely to trigger more selldown towards RM10.34 (23.6% FR). Technical rebound targets are RM11.00 (mid Bollinger band) and RM11.20 (downtrend line resistance) levels.

'''' Trading Buy with a stop loss target below RM10.34.