RHB Investment Bank has maintained its BUY recommendation on Tenaga Nasional Bhd (TNB), with a target price of RM16.50, as it expects the utility group’s one-off electricity bill relief measure to have a limited impact on earnings.
The target price implies a potential upside of 26%, alongside an estimated dividend yield of about 4%.
In its latest research note, RHB said TNB’s additional fuel cost allocation of RM120 million to RM150 million is intended to support approximately one million domestic customers consuming between 600kWh and 800kWh of electricity a month.
The measure, which covers the monthly automatic fuel adjustment (AFA), retail charge and Sales and Service Tax (SST), is expected to reduce affected households’ electricity bills by an average of RM40 a month.
According to RHB, TNB introduced the measure after hotter weather associated with El Niño and the global energy crisis contributed to higher household electricity consumption.
The proportion of domestic customers consuming less than 600kWh a month declined to 80% in August from 85% in January, with more households using up to 1,000kWh monthly.
In response, TNB raised the consumption threshold for additional protection from 600kWh to 800kWh for the September-to-December 2026 period.
Management has confirmed that the measure is temporary, with the threshold scheduled to revert to 600kWh in January 2027.
RHB said the allocation would not affect TNB’s approved returns on its regulated asset base, which underpin the group’s earnings from regulated operations.
The research house said TNB’s RM150 million cost estimate is based on relatively high assumptions for fourth-quarter fuel prices and foreign exchange movements.
These include coal prices of US$138 per tonne, compared with US$123 at the time of the report, and gas prices of RM74 per million British thermal units (MMBtu), against RM31 for Tier 1 and RM57 for Tier 2 gas.
The estimate also assumes an exchange rate of RM4.20 against the US dollar, compared with RM4.09 at the time of the assessment.
RHB noted that the Energy Commission expects coal and gas prices to remain stable for the rest of the year.
It therefore believes the actual cost could be lower than the initial estimate, with downside risk to TNB’s FY2026 earnings capped at approximately 3%.
RHB expects TNB to report stronger earnings in the second half of FY2026, supported by a projected reduction in its effective tax rate to 18% in the fourth quarter.
The research house expects the tax benefit to more than offset the additional electricity bill relief allocation.
It also anticipates that TNB will maintain positive free cash flow after absorbing the additional cost, supporting its estimated dividend yield of about 4%.
RHB made no changes to its FY2026 and FY2027 earnings forecasts or RM16.50 target price.
Following a 12% decline in TNB’s share price from its recent high, the research house maintained its view that share price weakness presents an accumulation opportunity.
RHB identified TNB’s role in Malaysia’s National Energy Transition Roadmap and its regulated earnings framework as supporting factors for its valuation.
However, it highlighted delayed capital expenditure approvals, any further expansion of electricity subsidies and a higher effective tax rate as key downside risks to its forecasts.
The share price has decline 6.7% over the six months to 13.32
