20051026 Hwang DBS Daily Focus

Highlights
>
> Tenaga Nasional - Disappointing 4Q05 - Maintain Buy
>
> FY05 results (excl. forex and exceptional items) came in below consensus
> estimate and our expectation by 16% and 18% respectively. Revenue growth
> was within expectation but EBITDA margin fell from 31.8% to 29.3% mainly
> due to higher fuel cost, which resulted in a 11.6% drop in core earnings
> for FY05. We maintain our view that a tariff increase in early 2006 (which
> Tenaga said the proposal is still under review by the government) is
> inevitable in view of rising generation cost. Hence, we maintain our BUY
> call on Tenaga with a DCF-based target price of RM12.00.
>
> Comments
>
> AirAsia - Receives investment allowance incentive from Government -
> Maintain Buy
>
> The Ministry of Finance has approved AirAsia investment allowance
> incentive application. The incentive constitutes income tax exemption of
> 60% on qualifying capital expenditure incurred within a 5 year period (1
> July 2004 to 30 June 2009), to be deducted up to 70% of statutory income
> for each year of assessment. The incentive is in addition to the normal
> 100% allowance for capital expenditure.
>
> The incentive will lower cash taxes (on the cash flow statement) and
> improve net cash flow. However, the impact to the profit and loss may
> depend on whether there will be deferred taxes recognized. The recognition
> is cosmetic. The incentive is a major positive for AirAsia in view of
> their aircraft acquisition program. We maintain our Buy call on AirAsia
> with a RM1.75 price target. 
>
> Construction - Second Penang bridge work should start by 2008 - Maintain
> Neutral
>
> Works Minister Datuk Seri S. Samy Vellu said that construction of a second
> bridge to Penang should start by 2008 (and be completed by 2013), if
> traffic congestion is to be prevented. He added that the construction of a
> third lane on both sides of the RM1.25bn bridge would not be able to
> absorb the additional traffic. The expansion work, which includes a
> special lane for motorcycles at a cost of RM402m, is scheduled for
> completion in Mar 2008.
>
> The construction of a second bridge should improve sentiment for the
> sector. UEM Builders (Not Rated) should be among the contractors eyeing
> the construction of a second bridge.