RHB Research maintains Outperform on Tenaga, FV RM7.80 (5347)

KUALA LUMPUR: RHB Research Institute is maintaining its Outperform recommendation on Tenaga Nasional Bhd (TNB) with an unchanged fair value of RM7.80 based on target FY13 price-to-earnings ratio (PER) of 15 times and FY13 EPS of 52.2 sen.
"Earnings
growth should remain intact despite a potential delay in the Malacca
LNG RGT, as the fuel cost sharing mechanism will likely continue until
LNG imports arrive while coal prices remain on a downward trend," it
said on Thursday.
RHB Research said it remains optimistic on LNG
pricing, as the government has consistently shown that any change to
gas pricing will be earnings neutral to TNB.
The research house
said during a briefing with TNB's management on Wednesday, the latter
highlighted that TNB sees non-regulated businesses as the key growth
driver going forward, and is targeting RM5bil in revenue by 2015 (FY11:
RM1.8bil).
"While only 5.6% of FY11 revenue, management believes
geographical expansion in new markets such as Vietnam and Indonesia for
potential O&M (operations & maintenance) services are key
growth drivers as the domestic business is mature," it said.
RHB
Research said to facilitate this, TNB is setting up three new divisions
(operations improvement, new projects, corporate affairs) headed by new
internal appointments.
The research house viewed these initiatives as positive operationally, but are unlikely to significantly impact earnings.
"Management
expects electricity demand growth of 4-5% in FY13, while coal prices
should remain stable and is unlikely to break above US$100 a tonne," it
said.