TENAGA – Fundamental Analysis (3 Aug 2015)

TENAGA Analysis:-

Excel – http://1drv.ms/1IzheXR

Notes – http://tinyurl.com/kyf426u

My View:-

  • Fair value:
    • Absolute EY%
      • Trailing:
        • FY14 (EPS: 1.146) – 15.93 (Uncertainty Risk: MEDIUM)
        • R4Q (EPS: 1.179) – 16.39 (Uncertainty Risk: MEDIUM)
      • Forward:
        • FY15 (EPS: 1.137 ± 5%) – From 15.02 to 16.60 (Uncertainty Risk: MEDIUM)
        • FY16 (EPS: 1.185 ± 5%) – From 15.66 to 17.31 (Uncertainty Risk: MEDIUM)
      • EPS applied to reach the current stock price (12.2): 0.877
  • 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
  • TENAGA’s 9MHFY15 core earnings came in 24%yoy higher at RM4.39b. 3QFY15 figure reflected the recognition of an over-recovered pre-tax amount of RM1.82bn (RM1.5bn-post tax) for a period of 17 months (Jan 14-May 15). Due to the timing of the one-off recognition, it has resulted in a drag on the core earnings of the review quarter. Moving forward, the process would be clearer with each quarterly result would only reflect the ICPT amount for the respective quarter.
  • 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 – Q3 2015 Financial Report (30 Jul 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4815317

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

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