Investor Presentation_ Utilities & Infrastructure_ Tight Power Markets

Summary of Key Points from the Investor Presentation on Utilities & Infrastructure in Southeast Asia Industry Overview - The electricity markets in Southeast Asia are tightening due to a doubling in power consumption growth, driven by increasing demand from data centers and AI applications [1][10] - Malaysia is identified as a significant beneficiary of the revised electricity demand estimates, which have been adjusted upward by 130 basis points since 2023 [2] Core Companies and Recommendations - Preferred companies in the sector include: - Tenaga: Overweight rating, expected to benefit from energy transition and increased demand from data centers [10] - SembCorp Industries (SCI): Overweight rating, anticipated to maintain strong returns due to tight electricity markets [10][12] - ICT: Overweight rating, expected to sustain outperformance with top-quartile yield management [11] - Keppel: Overweight rating, projected to turn around with strong infrastructure earnings [10] - Other companies mentioned include Manila Electric, Aboitiz, and PGAS, with varying ratings from overweight to underweight [9] Market Dynamics - Electricity markets in Singapore and India are expected to remain tight through 2026, with Singapore experiencing decade-high electricity prices due to low reserve margins [12][30] - The Philippines is projected to see strong electricity demand growth into 2025, with potential upside from new gas power plants and LNG import terminals [12] - The overall demand trajectory for ASEAN electricity is expected to continue its pre-COVID growth pattern, keeping generation markets tight [19] Financial Metrics and Projections - Key financial metrics for preferred companies include: - Tenaga: Price target of MYR 20.60, current price MYR 13.86, representing a 49% upside [9] - SembCorp: Price target of SGD 7.20, current price SGD 5.63, representing a 28% upside [9] - ICT: Price target of PHP 460.00, current price PHP 347.00, representing a 33% upside [9] - Average return on equity (ROE) for SCI is expected to sustain above 17% in the coming years [12] Regional Comparisons - ASEAN countries, particularly Thailand, the Philippines, and Malaysia, are positioned similarly in terms of renewable opportunities and demand, while Singapore faces challenges due to tight supply conditions [13] - Electricity prices in Singapore and the Philippines are among the highest in the region, with Singapore's spot power price projected to remain elevated [47][48] Additional Insights - The demand for data centers in ASEAN is expected to grow significantly, with Malaysia identified as a key beneficiary of this trend [51][53] - The cost of electricity generation varies across ASEAN, with Malaysia having a generation tariff of US cents 7.5/kWh, which is competitive compared to other countries in the region [79] - The transition to renewable energy is ongoing, but ASEAN's generation mix is still lagging behind global peers, with a significant reliance on coal and natural gas [81][82] This summary encapsulates the critical insights from the investor presentation, highlighting the dynamics of the utilities and infrastructure sector in Southeast Asia, key players, and financial projections.