TENAGA (5347) : Tenaga lacking long term earnings outlook: CIMB Research
KUALA LUMPUR: CIMB Equities Research was negatively surprised by the government's statement that there would be no increase in electricity tariff until June 2015.
It said on Friday the RM1.68bil cost will be borne by the government through the independent power producers (IPP) savings, and foregone revenue by Petronas as subsidised gas prices have been maintained at RM15.20 per MMBtu. The total cost translates into a hypothetical tariff hike of 3.11 sen a kWh.
“Tenaga remains a Hold, with an unchanged target price of RM13.62, based on 12.9 times FY16 earnings, implying a 20% discount to the market, which we think is merited given Tenaga's lack of long-term earnings visibility,” it said.
To recap, the government has decided that there will be no increase in electricity tariff until June next year. Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili said that the government will bear the cost of RM1.68bil through the utilisation of IPP savings.
The RM1.68bil is for the fuel cost pass through (FCPT) cost from Jan 2014 to June 2014 of RM465.9mil, the cost for July 2014 to Dec 2014 of RM382mil and foregone revenue by Petronas of RM836m.
The foregone revenue by Petronas comes from the fixed price of subsidised piped gas of RM15.20/MMBtu, which was supposed to have been raised by RM1.50/MMBtu every six months as well.
The RM1.68bil cost translates into a hypothetical tariff hike of 3.11 sen/kWh or 8% of the existing tariff.
According to the minister, after absorbing the FCPT costs to maintain the current tariff, the balance in the IPP savings is only RM170mil and insufficient to offset future FCPT cost components.
“While, in the near term, Tenaga's earnings are expected to be stable, underpinned by lower coal prices and improved coal generation, we maintain our view that the FCPT is needed to cover for the risk of higher generation costs due to myriad potential factors.
“Tenaga remains a Hold, with an unchanged target price of RM13.62, based on 12.9 times FY16 earnings, which is a 20% discount to the market P/E. We think Tenaga's discount is merited given the uncertainty pertaining to its longer-term earnings visibility,” said CIMB Research. - The Star
KUALA LUMPUR: CIMB Equities Research was negatively surprised by the government's statement that there would be no increase in electricity tariff until June 2015.
It said on Friday the RM1.68bil cost will be borne by the government through the independent power producers (IPP) savings, and foregone revenue by Petronas as subsidised gas prices have been maintained at RM15.20 per MMBtu. The total cost translates into a hypothetical tariff hike of 3.11 sen a kWh.
“Tenaga remains a Hold, with an unchanged target price of RM13.62, based on 12.9 times FY16 earnings, implying a 20% discount to the market, which we think is merited given Tenaga's lack of long-term earnings visibility,” it said.
To recap, the government has decided that there will be no increase in electricity tariff until June next year. Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili said that the government will bear the cost of RM1.68bil through the utilisation of IPP savings.
The RM1.68bil is for the fuel cost pass through (FCPT) cost from Jan 2014 to June 2014 of RM465.9mil, the cost for July 2014 to Dec 2014 of RM382mil and foregone revenue by Petronas of RM836m.
The foregone revenue by Petronas comes from the fixed price of subsidised piped gas of RM15.20/MMBtu, which was supposed to have been raised by RM1.50/MMBtu every six months as well.
The RM1.68bil cost translates into a hypothetical tariff hike of 3.11 sen/kWh or 8% of the existing tariff.
According to the minister, after absorbing the FCPT costs to maintain the current tariff, the balance in the IPP savings is only RM170mil and insufficient to offset future FCPT cost components.
“While, in the near term, Tenaga's earnings are expected to be stable, underpinned by lower coal prices and improved coal generation, we maintain our view that the FCPT is needed to cover for the risk of higher generation costs due to myriad potential factors.
“Tenaga remains a Hold, with an unchanged target price of RM13.62, based on 12.9 times FY16 earnings, which is a 20% discount to the market P/E. We think Tenaga's discount is merited given the uncertainty pertaining to its longer-term earnings visibility,” said CIMB Research. - The Star
