Malaysia Airport Holdings; Hold; RM5.75
Price target: RM6.70; MAHB MK
Fund raising to cover higher costs of klia2

Malaysia Airports Holdings (MAHB) has proposed a private placement of 110m new shares, equivalent to 10% of its issued share capital of 1.1bn, in an effort to part finance klia2 which is slated to begin operations in April 2013. The pricing for the placement has not been determined yet and potential investors will be identified via a book building exercise later.

Assuming MAHB issues its new placement shares at RM5.50 per share, it would be able to raise RM605m, which would be used to finance the construction of new klia2. At this pricing level, the funds raised would be higher than our initial assumption of RM550m previously. This would reduce the additional borrowings required by MAHB. The Group expects to complete this fund raising exercise by 1H2012.

Tenaga Nasional; Buy; RM5.97
Price target: RM7.00; TNB MK
TNB's CEO will not renew contract upon expiry in June

Tenaga Nasional Bhd (TNB) CEO Datuk Seri Che Khalib Mohd Noh will not be renewing his contract when it expires in June this year after heading the national utility for the past seven years. TNB's board has accepted his request and has begun finding a replacement.

It is reported that the most suitable replacement would be TNB's chief operating officer/executive director Datuk Azman Mohd, but TNB is also getting consultants to identify potential candidates. An internal candidate would ensure smooth transition, while a new candidate may bring new excitement to TNB. Nevertheless, we expect minimal impact to TNB's stock price as the development is not new. The CEO has indicated earlier that he will not renew his contract upon expiry. In addition, the Energy Commission has taken a more proactive role recently to look into problems related to the power sector and take charge of the competitive bidding process for the new power plants. The Energy Commission is also responsible for the tariff review proposal.

We maintain our Buy rating for TNB with RM7.00 TP for strong earnings recovery in FY12. We expect TNB's earnings to recover strongly in FY12F following the RM2bn gas compensation and increase in gas supply to 1,150mmscfd for FY12. The gas shortages issue should also be resolved following the completion of the new regas plant by Petgas in Jul 2012.