But, this should be the last of it. We believe that Tenaga's 1QFY12 results (scheduled for release on 17 January) will show it is still loss-making due to lower-than-normal gas supply that requires burning oil and distillates to generate power. At 4.0-4.3x the cost of gas, this is a loss-making proposition. Nonetheless, this should be priced in. The business outlook has improved following implementation of the cost sharing mechanism that will provide at least RM2.0b to Tenaga, as well as the possibility that Tenaga will be granted a tariff hike. Maintain BUY, with unchanged target price of RM6.90 pegged to 13x FY12 PER.

Maybank research (10 January 2012)

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