TENAGA–Fundamental Analysis (28 Apr 2016)

Excel – Download the analysis file

Latest Financial – Q2 2016 Financial Report (27 Apr 2016)

FY16 Q2 Results Highlight:

  • Tenaga reported 2QFY16 core net profit of RM1.5b (normalised for translation losses of RM235m), which brought 1HFY16 core earnings to RM3.5b. (MIDF 28 Apr 2016)
    • Electricity unit sales in 2QFY16 grew some 4%yoy, much stronger than 1QFY16’s +3.2%yoy and the 2.2% – 2.5% growth seen in the past two financial years. Revenue from Tenaga’s electricity sale grew by a stronger 5%yoy given a higher average tariff achieved at 39.28sen/kwH (+1%yoy).
    • Demand growth was largely driven by the commercial (+6.1%yoy) and residential (+12%yoy) segments while the industrial segment was down slightly (-1.4%yoy). The commercial and residential segments account for 58% of total electricity demand.
  • However, 2QFY16 core net earnings grew by a slower 1.3%yoy (+3.3%ytd) (after normalising 2QFY15 for ICPT over-recovery of RM981m) as margins were impacted by higher fuel cost, i.e. higher subsidised piped gas price (which was increased 9% from RM16.70/mmbtu to RM18.20/mmbtu from Jan 2016 given a subsidy rollback), and higher effective coal price (+5.5%ytd) – which was mainly due to the weaker Ringgit. Underlying USD denominated coal cost actually reduced 16%. These fuel cost volatility is likely to be taken into account in the next ICPT review for 2HCY16.



In my opinion, fair value of TENAGA range from 15.8 to 17.2. The uncertainty risk of fair value is from MEDIUM to HIGH.

Going Forward:

Main catalysts:

  1. Strong earnings visibility post-ICPT implementation
  2. Overseas expansion provides scope for stronger growth in the mid-term
  3. The prolonged heatwave hitting the country currently provides a temporary boost to demand

(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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