Friday, June 29, 2018

Tenaga: The Cost Pass-through Rule Still Applies (Updated)

This morning, Tenaga jumped up more than RM1.00 after it announced that the Government of Malaysia (“Government”) has approved, via a letter from Suruhanjaya Tenaga (“ST”) dated 28 June 2018, the continued implementation of Imbalance Cost Pass-Through (“ICPT”) for the period of 1 July – 31 December 2018. For more, go to here.

Chart 1: Tenaga's daily chart as at June 29, 2018 (Source:

This is a positive development as the market was concerned over the past few weeks that Tenaga may have to do "national service" by absorbing instead of passing through cost increases. In fact, the market - which is under selling pressure from foreign funds - was gripped by the fear that the new government will go after these companies for their past link to Najib & UMNO. I find that illogical because most of these blue chip stocks are government-linked companies. By default, they are owned by the people of Malaysia. The new government will not be so silly as to harm these companies even if their Chairmen were friendly to Najib & UMNO. The most logical thing to do is to put some pressure on their Board of Directors to remove the Chairman. That's why I believe the sell-down of CIMB is grossly overdone.  

Chart 2: CIMB's daily chart as at June 29, 2018 (Source:

The Government's decision in regards to the Tenaga cost pass-through rule suggests that it cannot simply pressure TM to lower its broadband charges. Earlier the minister concerned has declared that Unifi should lower its broadband charges by 25% by end of the year (here). This call by the minister has added pressure on TM share price - leading to a sharp drop over the past few weeks.

Chart 3: TM's daily chart as at June 29, 2018 (Source:

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