TENAGA–Fundamental Analysis (9 Mar 2016)

Fundamental Analysis as of FY15 – http://www.slideshare.net/lcchong76/tenaga-fundamental-analysis-fy15

Excel – http://1drv.ms/1LcnDk2

Latest Financial – Q1 2016 Financial Report (28 Jan 2016) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4988493

FY16 Q1 Results Highlight:

  • TENAGA reported core net earnings of RM1.976b for its 1QFY16. Core earnings increased 140% QoQ (4QFY15: RM820.9m) because:
    • Stronger than expected total electricity sales growth of 3.2% in the 1Q16 period
    • Lower than expected effective tax rates of ~9%. The lower effective tax rate is mainly due to the utilisation of reinvestment allowance incentive during the current quarter.
  • Normalised EBITDA margins expanded to 35% from 33% in 1QFY15 given lower LNG consumption and price (-29%yoy). This is partly offset by higher effective coal price (+10%yoy at RM254/mt) given the weaker Ringgit (in USD terms, coal price was 16% lower at USD59/mt).
  • The bulk of the 1QFY16 demand growth was driven by the domestic segment (+6.3%yoy) followed by the commercial (+3.9%) and industrial segment (+1.2%), For the domestic segment, the growth was largely front-loaded i.e. mainly in Sep month and this moderated towards quarter end, whilst demand in the commercial and industrial saw a rebound in November 2015.



In my opinion, fair value of TENAGA range from 15 to 17. The uncertainty risk of fair value is MEDIUM.

Going Forward:

On 23 November 2015, TNB received notices of additional assessment for the years of assessment (‘YA’) 2013 and 2014 respectively for RM985.6 million and RM1,082.6 million. On 27 November 2015, TNB applied for judicial review and on 14 December 2015, the Kuala Lumpur High Court granted TNB leave to commence judicial review proceedings. The High Court also granted an interim stay of proceedings. TNB has obtained legal advice from a firm of prominent tax solicitors and on this basis, no provision has been made in the financial statements for the contingent liabilities up to the reporting date.

Tenaga has signed a new power purchase agreement (PPA) with 1MDB-owned Powertek Berhad for the extension of Powertek’s PPA by a period of three years and 10 months. This development is earnings neutral for Tenaga as savings from a revised PPA (where capacity payments are likely to be lower), will be passed on to consumers under the ICPT mechanism. Due to timing of the passing on of these savings though (which is only reviewed on a 6-months basis), there could be short-term spike in earnings as a result of the savings.

(FFO – Dividends) / Debt in FY15 was 36% which is above global industry average (35%). I think TENAGA should consider to increase its dividend payout in view of its strong cash position.


I will continue to hold this share, and accumulate it.

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


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