Top Story : Tanjong – Awaiting the next rerating catalyst Market Perform (down from OP)
Visit Note
♦ The next leg of growth for the power division would depend on acquisitions and management had previously expressed a target of doubling its current power capacity to 8,000MW over the next four to five years. This could include greenfield and/or brownfield projects with particular focus on regions such as South Asia, South East Asia, Middle East and North Africa.
♦ While we understand Tanjong could launch a new jackpot game later this year, not many details are known at the moment. Assuming the new game brings in around RM1m in sales per draw, we estimate a full-year impact could lift our earnings projections by around 2%. As for the RTO segment, management continues to work towards a resolution to the escalating expenses but this would take time.
♦ For Tropical Islands, visitor arrivals and ARPUs have been trending up while construction of accommodation (19 homes built and sold thus far) should further help address the challenge of low weekday visitor attendances and short stay visitors. As for TGV, we expect its FY10 operating profit contribution of RM14.8m to hold steady going forward.
♦ No change to our earnings forecasts.
♦ Our SOP-derived fair value of RM19.20 is unchanged. Tanjong’s strong share price performance means that the stock’s total potential return is roughly in line with our expected market return and hence, we downgraded our recommendation to Market Perform from Outperform.
♦ That said, we believe Tanjong stands a strong chance in securing some of the new power projects, which we believe would be value accretive. Our SOP valuation does not reflect such additions and hence, we see upside potential to our fair value if Tanjong is successful with its bids.
RHB Equity 360°(Tanjong, Plantation; Technical: Sunway)-13/04/2010
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