Excel – http://1drv.ms/1hxVgvl
– Fair value:
– Absolute EY%: Buy below 10.61, sell above 13.97 (MOS: 14.52%)
– The new tariff rates, which took effect from 1st Jan 14, are expected to boost bottom-line by RM1.17b per annum. While a review on tariff structure is expected every six months, the tariff is expected to stay unchanged at least till Dec 2014 given the recent wave of subsidies cut, which had resulted in rising living cost and inflationary pressure. Moving forward, when a new set of fuel cost pass-through mechanism is in place, TENAGA’s earnings are expected to stabilise. Its financial performance would then depend mainly on its operational efficiency.
– The tariff review in Jun could also bring about more earnings visibility, as it could signal that the government will continue to allow Tenaga to review its tariff in order to facilitate the pass-through of costs.
– Tenaga declared an interim single-tier dividend of 10 sen per share, representing 27% of its free cashflow. Dividends were in line as we expect dividends to be stronger moving forward given that it is committed to paying 40-60% of its annual free cashflow.
– In my opinion, the current price already factored in the growth drivers and risks.
– I will continue to hold TENAGA, and may accumulate TENAGA in the future.
Latest Financial – Q2 2014 Financial Report (24 Apr 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1602769
At the time of writing, I owned shares of TENAGA.