Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Tenaga Nasional Bhd
(Sept 14, RM5.12)
Maintain buy at RM5.21 with revised fair value of RM6.24 (from RM7.53): Tenaga Nasional Bhd's (TNB) share price has been bashed down over the past two months as a result of poor 3QFY11 results, continued gas supply issues, outages at coal-fired power plants and a lack of clarity on potential tariff hikes. The sell-off has seen its share price fall by 23% since July 8 compared with the FBM KLCI's 9%.
Despite the weak fundamentals, the valuations of TNB shares are too cheap to ignore. We therefore incorporate all the bad news surrounding the company into our forecasts and identify a new fair value as well as the strong support for the share price in these uncertain times.
The two main factors we are building in are a cut in our demand growth forecast for FY12 from 2.8% to 2% to include uncertainties in the global economy and continued gas supply disruptions. Gas supply was disrupted by planned outages which will last until January 2012 and delayed partial restoration of gas supply from the Bekok gas platform which we believe was only restored this month (100mmscfd) compared with the earlier scheduled June 2011 deadline. These, together with planned maintenance of coal plants, may result in TNB incurring a loss in 4QFY11'' similar to that in 3QFY11.
All in all, our FY11 net profit forecast is cut by 55.5% while our FY12 forecast is cut by 15.6%. Our discounted cash flow-based fair value is cut from RM7.53 to RM6.24. Nonetheless, there is still some 20% upside to our fair value. More importantly, despite the forecast losses in 4QFY11 and 1QFY12, the stock's book value per share should not drop below RM5.18, a level that provides strong support for the share price. As such, with the current share price so close to the forecast minimum book value, we maintain our 'buy' call on TNB. ' OSK Research, Sept 14
This article appeared in The Edge Financial Daily, September 15, 2011.
Company Name: TENAGA NASIONAL BHD
| Research House: OSK | Price Call: BUY | Target Price: 6.24 |
Tenaga Nasional Bhd
(Sept 14, RM5.12)
Maintain buy at RM5.21 with revised fair value of RM6.24 (from RM7.53): Tenaga Nasional Bhd's (TNB) share price has been bashed down over the past two months as a result of poor 3QFY11 results, continued gas supply issues, outages at coal-fired power plants and a lack of clarity on potential tariff hikes. The sell-off has seen its share price fall by 23% since July 8 compared with the FBM KLCI's 9%.
Despite the weak fundamentals, the valuations of TNB shares are too cheap to ignore. We therefore incorporate all the bad news surrounding the company into our forecasts and identify a new fair value as well as the strong support for the share price in these uncertain times.
The two main factors we are building in are a cut in our demand growth forecast for FY12 from 2.8% to 2% to include uncertainties in the global economy and continued gas supply disruptions. Gas supply was disrupted by planned outages which will last until January 2012 and delayed partial restoration of gas supply from the Bekok gas platform which we believe was only restored this month (100mmscfd) compared with the earlier scheduled June 2011 deadline. These, together with planned maintenance of coal plants, may result in TNB incurring a loss in 4QFY11'' similar to that in 3QFY11.
All in all, our FY11 net profit forecast is cut by 55.5% while our FY12 forecast is cut by 15.6%. Our discounted cash flow-based fair value is cut from RM7.53 to RM6.24. Nonetheless, there is still some 20% upside to our fair value. More importantly, despite the forecast losses in 4QFY11 and 1QFY12, the stock's book value per share should not drop below RM5.18, a level that provides strong support for the share price. As such, with the current share price so close to the forecast minimum book value, we maintain our 'buy' call on TNB. ' OSK Research, Sept 14
This article appeared in The Edge Financial Daily, September 15, 2011.
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