Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: MAYBANK
KUALA LUMPUR: Maybank Investment Bank Bhd Research has downgraded TENAGA NASIONAL BHD [] to a sell at RM8.29 and cut its target price for the stock to RM7.35 (from RM11.80).
It said in a note Thursday, June 3 that after three months since the Energy minister mentioned a need to educate the public to justify higher electricity prices, there was no sign of higher base tariffs, suggesting it was low on the government's priorities.
A recent Pemandu proposal is for a gas and corresponding electricity hike without a change in the base tariff to raise ROA, it said.
Maybank IB Research said incremental electricity demand will have to be coal-generated, which is more costly (than gas) and results in a more volatile cost structure.
Existing coal plants could operate at 90% capacity by 2015 and industry reserve margins below 20% by then, raising the possibility of power shortages, it said.
The research house said feed-in tariffs, the price at which Tenaga buys excess renewable energy from third parties, may be imposed on Tenaga without sorting out a base tariff hike.
"We are removing our assumed 4% tariff hike from our forecasts, reducing our discounted cash flow-based target price to RM7.35, with earnings falling by 18% and 11% in FY11-12," it said.
Company Name: TENAGA NASIONAL BHD
Research House: MAYBANK
KUALA LUMPUR: Maybank Investment Bank Bhd Research has downgraded TENAGA NASIONAL BHD [] to a sell at RM8.29 and cut its target price for the stock to RM7.35 (from RM11.80).
It said in a note Thursday, June 3 that after three months since the Energy minister mentioned a need to educate the public to justify higher electricity prices, there was no sign of higher base tariffs, suggesting it was low on the government's priorities.
A recent Pemandu proposal is for a gas and corresponding electricity hike without a change in the base tariff to raise ROA, it said.
Maybank IB Research said incremental electricity demand will have to be coal-generated, which is more costly (than gas) and results in a more volatile cost structure.
Existing coal plants could operate at 90% capacity by 2015 and industry reserve margins below 20% by then, raising the possibility of power shortages, it said.
The research house said feed-in tariffs, the price at which Tenaga buys excess renewable energy from third parties, may be imposed on Tenaga without sorting out a base tariff hike.
"We are removing our assumed 4% tariff hike from our forecasts, reducing our discounted cash flow-based target price to RM7.35, with earnings falling by 18% and 11% in FY11-12," it said.
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