ANALYSTS are “neutral” on Tenaga Nasional Bhd (TNB) due to lack of catalysts for now to reinvigorate it.
Public Investment Bank Bhd said it is maintaining a “neutral” outlook on TNB with an unchanged target price of RM12.32 due to a lack of catalysts.
“On the tariff hike, it’s anybody’s guess. With the six-month tariff review deadline come and gone, the management maintains that it is up to the cabinet to decide whether to approve TNB’s proposal for a tariff review to account for higher fuel costs incurred in first half of this year.”
The firm, nonetheless, said TNB management remains optimistic that the fuel-cost-pass-through mechanism is in place and the group will be compensated for its higher fuel cost regardless.
“When, how and how much are the million-dollar questions that none can answer for now.”
AmResearch Sdn Bhd noted that foreign shareholders have been progressively selling down TNB from a peak of 27.8 per cent in December last year to 25.4 per cent in May this year.
The firm has fine-tuned TNB’s financial years 2014-2016 earnings forecast as its lower tax assumptions are largely offset by a one percentage point reduction in electricity demand growth forecast from four per cent to three per cent, as demand growth in the 10 months of the current financial year had only reached 2.5 per cent.
TNB’s results were flat year-on-year (y-o-y) for third quarter ended May as the group continued to consume less coal and more expensive gas, incurring higher fuel costs due to coal plant outages and decreased usage of hydropower in the dry season.
Barring forex translation differences and tax adjustments, the group recorded core net profit of RM1.4 billion for the quarter which was essentially unchanged from the third quarter of last year.
Fuel cost increased RM2.1 billion on higher gas prices and generation mix.
Overall fuel costs rose 19 per cent y-o-y to RM13.3 billion in the nine-month ending this year due to increased usage of gas power plants (gas-based generation jumped 25 per cent y-o-y) and higher gas prices, with liquefied natural gas prices averaging RM47per milllion British thermal unit in the first half of the year.
Consequently, TNB’s gas cost increased by RM4.1 billion to RM8.9 billion in nine months ending this year, which was only partially mitigated by RM2 billion savings from reduced usage of coal, oil and distillates.
