Company Name: TENAGA NASIONAL BHD
| Research House: Affin Hwang Capital | Price Call: BUY | Target Price: 16.50 |
KUALA LUMPUR: Affin Hwang Investment Bank Research has reiterated its "Buy" call on Tenaga Nasional Bhd (TNB) with an unchanged target price (TP) of RM16.50 per share.
The research house said it did not expect any negative surprises in TNB's first quarter of its financial year ending 2015 (FY15) earnings, as fuel costs should be well managed amid the stable gas supply.
"Going forward, we expect electricity demand growth to rebound while earnings visibility should remain strong in FY15," it said in a note Friday.
It added TNB had resilient business model and robust cash flows, and a longer-term catalyst would be the automatic implementation of the Imbalance Cost Pass Through (ICPT) mechanism, which would give it strong earnings visibility by being insulated from fluctuations in fuel costs.
ICPT is a mechanism that allows TNB to reflect changes (either an increase or reduction) of the uncontrollable fuel costs in the electricity tariff every six months. In the event of a reduction in fuel costs, TNB will also pass through the reduction to customers.
At 11.40 am, TNB shares on Bursa Malaysia was flat at RM14.20, with 3.11 million units traded. - BERNAMA
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