TENAGA – Fundamental Analysis (26 Jan 2015)

TENAGA Analysis:-

Excel – http://1drv.ms/1GWi9H3

Notes – http://tinyurl.com/kt35cgh

My View:-

  • Fair value:
    • Absolute EY%
      • Trailing:
        • FY14 (EPS: 1.146) – Fair value 15.54 (Fair Value Uncertainty: HIGH)
        • R4Q (EPS: 1.256) – Fair value 17.03 (Fair Value Uncertainty: MEDIUM)
      • Forward:
        • FY15 (EPS: 1.164) – Fair value 15.79 (Fair Value Uncertainty: HIGH)
        • FY16 (EPS: 1.225) – Fair value 16.61 (Fair Value Uncertainty: HIGH)
      • EPS applied to reach the current stock price (15.1): 1.113
    • Absolute PE
      • FY14 (EPS: 1.146) – Fair value 14.71 (Fair Value Uncertainty: HIGH)
      • R4Q (EPS: 1.256) – Fair value 16.13 (Fair Value Uncertainty: HIGH)
  • 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.
  • Positive on TNB’s earnings outlook given the easing trend in fuel costs due to the decline in coal and gas prices
  • I will continue to hold TENAGA, and may accumulate TENAGA in the future.

Latest Financial – Q1 2015 Financial Report (22 Jan 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1858645

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

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