RHB Research has maintained a “Buy” recommendation for Tenaga Nasional Bhd with an unchanged DCF-based MYR11.50 TP.
It said that it maintains its earnings estimates pending further disclosure from TNB or the EC. Note that our TP incorporates an 8% discount based on our ESG scoring of 2.6.
RHB said that the stock is trading at a 7-year low, and foreign shareholdings stood at 12.1% as of Dec 2021. (Dec 2020: 12.9%). Downside risks: Higher operating costs and higher-than-expected plant outages.
It said that although the current electricity tariff schedule is unchanged, the actual earnings impact of the Regulatory Period (RP) 3 to Tenaga Nasional remains unclear for now.
It said that its base case assumption for RP3 is that WACC is lowered to 7%, but the magnitude is cushioned by growth in the regulatory asset base (RAB).
The stock is trading at 7-year low, and foreign shareholdings stood at 12.1% as of Dec 2021. (Dec 2020: 12.9%). RHB said that its downside risks: Higher operating costs and higher-than-expected plant outages.
RHB said that although the current electricity tariff schedule is unchanged, the actual earnings impact of RP3 to TNB remains unclear for now, as the key parameters – such as demand growth, WACC, Capex, RAB, opex, and fuel benchmark – were not disclosed.
It said that there is a possibility that TNB’s earnings could be negatively affected if the fuel parameters are adjusted upwards without changing the base tariff. “If the fuel benchmarks are similar to RP2+ parameters, KWIE may continue to subsidise the domestic users, and we also expect a higher surcharge on non-domestic users going forward,” the research house said.
