TENAGA – Fundamental Analysis (3 Nov 2014)

TENAGA Analysis:-

Excel – http://1drv.ms/1xRsevT

My View:-

– Fair value:
  – Absolute EY%
    – Trailing:
      – FY14 (EPS: 1.146) – Fair value 16.57 (Fair Value Uncertainty: MEDIUM)
      – R4Q (EPS: 1.147) – Fair value 16.58 (Fair Value Uncertainty: MEDIUM)
    – Forward:
      – FY15 (EPS: 0.978) – Fair value 14.14 (Fair Value Uncertainty: HIGH)
      – FY16 (EPS: 1.052) – Fair value 15.22 (Fair Value Uncertainty: MEDIUM)
    – EPS applied to reach the current stock price (13.36): 0.924
– The optimistic outlook on electricity demand growth in Malaysia would be a booster to TNB’s revenue going forward:
  – A higher anticipated electricity sales growth driven mainly by commercial and industrial sectors
  – The more favourable generation mix by capitalising on the softening coal price
– While TNB’s short term earnings may look rosy at this juncture, the implementation of FCPT mechanism remains as TNB’s secular catalyst in order to justify an even higher future valuation as it will definitely provide a greater clarity and stability to TNB’s long term earnings. Nonetheless, no unstinting commitment thus far with regard to the FCPT implementation from the Government. Without the implementation of FCPT mechanism, TNB’s full potential future earnings growth will continue to be restricted or to be risked by the future fluctuation in coal and LNG prices, evidenced by the under recovery of the earlier escalated fuel cost incurred in 1HFY14.
– I will continue to hold TENAGA, and may accumulate TENAGA in the future.

Latest Financial – Q4 2014 Financial Report (31 Oct 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1782001

At the time of writing, I owned shares of TENAGA.

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