Coming together; upgrade to Buy. Tenaga received confirmation for a fuel sharing mechanism with the government and PETRONAS. Each party will equally split the additional cost incurred of RM3.1b for burning pricey oil and distillates which means Tenaga will get a RM2b cheque soon. The investment proposition for Tenaga has improved; a tariff revision is very much in the bag. We upgrade the stock to BUY based on higher earnings outlook and better balance sheet health, with a new target price of RM6.90 (+17%) pegged to 13x FY12 PER.

Maybank research (2 December 2011)

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