KUALA LUMPUR (January 21): Maybank Investment Bank Bhd (Maybank IB) expects another strong quarter for Tenaga Nasional Bhd (TNB), with an estimated year-on-year (y-o-y) core net profit growth of 38% for the first quarter ended Nov 30, 2014 (1Q15).
In a note today, Maybank IB said that the positive outlook is based on the high proportion of coal in TNB’s (fundamental: 1.3; valuation: 1.0) generation during the quarter, and also an absence of major outages at the group’s coal plants.
“We estimate TNB’s core net profit at about MYR1.7b (38% y-o-y, 11% q-o-q), 28% of our FY15 forecast. This excludes the RM848 million compensation that TNB would receive for higher than budgeted fuel costs in CY14,” it said.
It said that TNB’s coal cost should remain benign, noting that the Newcastle benchmark averaged US$64 per tonne, down 19% y-o-y, during the quarter.
Meanwhile, consumption of gas fell 9% y-o-y to 1,213mmscfd during the period, due to a higher proportion of coal-fired generation.
The research house said TNB generated a total of 28,573GWh for the quarter, with gas and coal accounting for 49% and 46% respectively.
Going forward, the research house remained bullish on TNB with a “buy” call and a target price of RM16.00 for the stock, despite the Prime Minister’s announcement of no further tariff hikes in 2015.
“With coal costs presently trending below budget, a 2015 tariff hike was unlikely to begin with. Thus we view the Prime Minister’s announcement as a non-event,” said the research house.
TNB was down 2 sen or 0.14% at 10.58am, bringing a market capitalisation of RM81.27 billion.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company's financial dashboard.)