TSH (HOLD)

Upward Revision on Feed-in-Tariff

• TSH entered into a renewable energy power purchase agreement with Sabah Electricity Sdn Bhd, which will revise its electricity tariff sold to Sabah Electricity upwards from 21.25 sen/Kwh to 30 sen/kWh for 9 years, in line with the Renewable Energy Act approved by the Sustainable Development Authority Malaysia.
• Ceteris paribus, our estimates indicate that the feed-in-tariff revision will boost TSH’s 2013-14 net profit forecasts by approximately 2.5% and 2.3% respectively, assuming tariff revision to take place from 1 Jan 2013. 
• While we are positive on the latest development we note that this is not unexpected, and we have already reflected this in our earnings forecasts earlier on.
• SOP-derived TP maintained at RM2.36. Maintain our HOLD recommendation on the stock.

Source: Hong Leong Investment Bank Research - 2 May 2012