Tenaga Nasional Bhd (Jan 18, RM6.10)
Maintain buy with target price RM7: Tenaga Nasional Bhd achieved 1QFY12 ended November 2011 unit sales growth of 3.7% year-on-year (y-o-y), supported by demand growth from both the industrial (+4.4%) and commercial (+3.9%) segments with improvement from steel and cement plants, and recovery in demand from petrochemical plants.
Revenue in 1QFY12 came in much stronger at 12.5% after the 7% average tariff hike effective June 1, 2011. TNB’s 1QFY12 core net profit, after excluding foreign exchange loss of RM419.1 million, came in at RM194.4 million.
The strong earnings turnaround from 4QFY11 ended August core net loss of RM119.3 million, was the result of an increase in gas supply to 1,050 million metric standard cubic feet per day (mmscfd), from just 900 mmscfd in 4QFY11 as TNB incurred additional costs from using more coal, oil and distillate in its generation mix.
TNB has received RM1 billion in compensation due to gas shortages, and Petronas will pay the remaining RM1 billion over the next few months. Apart from the RM2 billion claim, TNB will continue to ask for compensation as the current gas supply still falls below the agreed supply of 1,350 mmscfd. The approval of the gas compensation has demonstrated TNB’s ability to pass on increases in cost through the cost pass-through mechanism.
We expect TNB’s earnings to recover strongly in FY12F following the RM2 billion gas compensation and increase in gas supply to 1,150 mmscfd for FY12. The gas shortage issue should also be resolved following the completion of the new regassification plant by Petronas Gas Bhd in July 2012.
Maintain “buy” for strong earnings recovery and attractive valuation of FY13F price earnings ratio (PER) of 13 times and price-to-book value of one times. Our target price of RM7 is pegged to 14 times CY13 PER, the average PER over the last two years. — HwangDBS Vickers Research, Jan 18
This article appeared in The Edge Financial Daily, January 19, 2012.
Maintain buy with target price RM7: Tenaga Nasional Bhd achieved 1QFY12 ended November 2011 unit sales growth of 3.7% year-on-year (y-o-y), supported by demand growth from both the industrial (+4.4%) and commercial (+3.9%) segments with improvement from steel and cement plants, and recovery in demand from petrochemical plants.
Revenue in 1QFY12 came in much stronger at 12.5% after the 7% average tariff hike effective June 1, 2011. TNB’s 1QFY12 core net profit, after excluding foreign exchange loss of RM419.1 million, came in at RM194.4 million.
The strong earnings turnaround from 4QFY11 ended August core net loss of RM119.3 million, was the result of an increase in gas supply to 1,050 million metric standard cubic feet per day (mmscfd), from just 900 mmscfd in 4QFY11 as TNB incurred additional costs from using more coal, oil and distillate in its generation mix.
TNB has received RM1 billion in compensation due to gas shortages, and Petronas will pay the remaining RM1 billion over the next few months. Apart from the RM2 billion claim, TNB will continue to ask for compensation as the current gas supply still falls below the agreed supply of 1,350 mmscfd. The approval of the gas compensation has demonstrated TNB’s ability to pass on increases in cost through the cost pass-through mechanism.
We expect TNB’s earnings to recover strongly in FY12F following the RM2 billion gas compensation and increase in gas supply to 1,150 mmscfd for FY12. The gas shortage issue should also be resolved following the completion of the new regassification plant by Petronas Gas Bhd in July 2012.
Maintain “buy” for strong earnings recovery and attractive valuation of FY13F price earnings ratio (PER) of 13 times and price-to-book value of one times. Our target price of RM7 is pegged to 14 times CY13 PER, the average PER over the last two years. — HwangDBS Vickers Research, Jan 18
This article appeared in The Edge Financial Daily, January 19, 2012.
