TENAGA (5347) - TNB’s generation risks capped, primed for good results
April 27, 2015 : 10:10 AM MYT
Tenaga Nasional Bhd
(April 24, RM14.60)
Maintain buy with an unchanged target price (TP) of RM17.20: TNB is expected to announce its results for second quarter of the financial year ending August (2QFY15) today. Barring any major operating surprises, we expect the numbers to top the corresponding 2QFY14 results.
We opine that TNB would register higher revenue on an annual basis as the latest numbers would include three months of higher-base tariff compared with two months in the previous year. This is due to the timing of electricity tariff revision which only took place on Jan 1, 2014.
We observe that generation mix contributions from gas, oil and distillates continue to trend down in 2QFY15, while coal mix contribution has revved up to approximately 48% of the total generation mix for Peninsular Malaysia. Meanwhile, we also noted that hydro mix had contributed significantly which we believe was due to the monsoon season from November to February.
Coal prices that have been on a patchy downtrend trajectory since the beginning of last year have started to move sideways, from which we expecti the trend to continue until at least the end of calendar year 2015. Nonetheless, the average market price for coal is approximately 20% lower compared with 2QFY14.
Coupled with lower utilisation of the expensive liquefied natural gas (LNG) to fire up gas plants, we opine that this would contribute towards richer margin attribution, thus our view of improved bottom-line figures on a yearly basis.
We are positive on TNB’s long-term prospects due to the government’s commitment to the full implementation of the fuel cost pass-through (FCPT) mechanism. The full implementation of FCPT will give a much sought-after stability to TNB’s long-term earnings. As such, we are maintaining our “buy” call on TNB with a TP of RM17.20 (weighted average cost of capital: 7.8%, terminal growth: 2.8%) which implies 15 times FY15 price-earnings ratio (PER) and 14 times FY16 PER. — MIDF Research, April 24
http://www.theedgemarkets.com
April 27, 2015 : 10:10 AM MYT
Tenaga Nasional Bhd
(April 24, RM14.60)
Maintain buy with an unchanged target price (TP) of RM17.20: TNB is expected to announce its results for second quarter of the financial year ending August (2QFY15) today. Barring any major operating surprises, we expect the numbers to top the corresponding 2QFY14 results.
We opine that TNB would register higher revenue on an annual basis as the latest numbers would include three months of higher-base tariff compared with two months in the previous year. This is due to the timing of electricity tariff revision which only took place on Jan 1, 2014.
We observe that generation mix contributions from gas, oil and distillates continue to trend down in 2QFY15, while coal mix contribution has revved up to approximately 48% of the total generation mix for Peninsular Malaysia. Meanwhile, we also noted that hydro mix had contributed significantly which we believe was due to the monsoon season from November to February.
Coal prices that have been on a patchy downtrend trajectory since the beginning of last year have started to move sideways, from which we expecti the trend to continue until at least the end of calendar year 2015. Nonetheless, the average market price for coal is approximately 20% lower compared with 2QFY14.
Coupled with lower utilisation of the expensive liquefied natural gas (LNG) to fire up gas plants, we opine that this would contribute towards richer margin attribution, thus our view of improved bottom-line figures on a yearly basis.
We are positive on TNB’s long-term prospects due to the government’s commitment to the full implementation of the fuel cost pass-through (FCPT) mechanism. The full implementation of FCPT will give a much sought-after stability to TNB’s long-term earnings. As such, we are maintaining our “buy” call on TNB with a TP of RM17.20 (weighted average cost of capital: 7.8%, terminal growth: 2.8%) which implies 15 times FY15 price-earnings ratio (PER) and 14 times FY16 PER. — MIDF Research, April 24
http://www.theedgemarkets.com
