Listing of Genco unit positive for TNB's share price, says Kenanga Research

Listing of Genco unit positive for TNB's share price, says Kenanga Research

TNB was planning a US$1 billion initial public offering (IPO) for Tenaga Genco next year, a Reuters report quoted sources close to the matter as saying.

KUALA LUMPUR: The planned listing of Tenaga Nasional Bhd's (TNB) power generation unit TNB Power Generation Sdn Bhd (TNB Genco) will be positive for the group's share price, Kenanga Research said.

TNB's share price had been heavily bashed down in the past years pertaining to the environmental, social, and governance (ESG) issue on its large portion of coal-fired power plants.

"By carving out the ESG-deficient genco business, valuations of the ESG-compliant non-genco business should see an upwards re-rating," Kenanga Research said in a note.

TNB was planning a US$1 billion initial public offering (IPO) for Tenaga Genco next year, a Reuters report quoted sources close to the matter as saying.

In what would be the country's largest IPO in a decade, TNB Genco could be valued at about US$4 billion, the sources said, declining to be named owing to the confidential nature of the matter.

The report said proceeds from the offering would be used to grow TNB Genco's renewable energy portfolio.

Kenanga Research said it was not surprised such an IPO would materialise in the future given that TNB had completed its reorganisation by decoupling the generation and retail businesses from the group

with the potential of separate listing albeit no timing was given.

"Meanwhile, when TNB first announced its reorganisation plan in 2019, it guided for its TNB Genco's gross earnings to grow to RM2.6 billion in 2025 from RM1.6 billion in 2018," it said.

Kenanga Research has maintained its "Outperform" call on TNB, with an unchanged target price of RM10.81.

https://www.nst.com.my/business/2022/08/822351/listing-genco-unit-positive-tnbs-share-price-says-kenanga-research