TENAGA – Fundamental Analysis (2 May 2015)

TENAGA Analysis:-

Excel – http://1drv.ms/1DRHJGq

Notes – http://tinyurl.com/kyf426u

My View:-

  • Fair value:
    • Absolute EY%
      • Trailing:
        • FY14 (EPS: 1.146) – Fair value 15.36 (Fair Value Uncertainty: HIGH)
        • R4Q (EPS: 1.342) – Fair value 17.99 (Fair Value Uncertainty: MEDIUM)
      • Forward:
        • FY15 (EPS: 1.181) – Fair value 15.82 (Fair Value Uncertainty: HIGH)
        • FY16 (EPS: 1.219) – Fair value 16.33 (Fair Value Uncertainty: MEDIUM)
      • EPS applied to reach the current stock price (14.36): 1.072
  • 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
  • In FY15 Q2, commendable revenue growth was driven by 2.8%yoy growth in electricity sold and higher average electricity tariff after the last revision in January 2014 (1HFY15 include 6months vs 2 months for 1HFY14).
    • The earnings would include an approximately RM1.5b of cost over-recovery estimates while the previous RM727m rebate for the period of March to June CY15 has yet to be reflected onto its financials
    • The amount RM727m will only be reflected in its 3QFY15 financials and the RM1.5b figure is not a definitive final amount.
  • 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
  • Coal prices continued to be favourable for TNB with the average coal price recorded in 1HFY15 was 12.0% lower compared to the previous year. Analysts expect coal prices will to continue moving sideways until at least the end of CY15.
  • I will continue to hold TENAGA, and may accumulate TENAGA in the future.

Latest Financial – Q2 2015 Financial Report (27 Apr 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4718505

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


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