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TNB’s Prospects Remain Promising Despite RM7 Billion Market Cap Wiped Out

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KUALA LUMPUR – Tenaga Nasional Bhd’s future prospects remain promising despite the new tariff adjustment and three per cent loss in its shares yesterday, said AllianceDBS Research.

TNB’s shares rallied this morning following the 5.8 per cent or 2.25sen/kWh tariff reduction in Peninsular Malaysia for the period of March–June 2015 announced by the government on Tuesday.

The giant utility’s stock was among the top actives this morning, falling 92 sen to RM13.48 with 15.24 million shares transacted as at 9.49 am.

The research house said yesterday’s selloff was ‘overdone’.

“Its future prospects remain promising given the strong earnings clarity with the on-going power sector reform and capacity expansion of its power plants which will boost net generation capacity by 15 per cent by 2017,” it said in a
note today.

AllianceDBS said the steeper cut in financial year (FY) 2015 was largely due to the transfer of fuel cost savings to consumers as it had earlier assumed that TNB would be able to enjoy the savings until the tariff review in June.

Nevertheless, it said TNB’s FY15 second quarter earnings performance is likely to remain promising due to a more favourable fuel mix towards hydro and coal.

The research house has trimmed its earnings forecast on TNB’s FY15-17 by nine per cent, six per cent and six per cent respectively.

It has also kept its ‘buy’ rating with a lower target price of RM16 folowing its earnings adjustment. – Bernama

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