Hot Stock Tenaga rises 2% on tariff hike speculation

by **Cals** Tue 20 May 2014, 00:01

Hot Stock Tenaga rises 2% on tariff hike speculation

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Monday, 19 May 2014 16:13

=KUALA LUMPUR (May 19): Tenaga Nasional Bhd rose as much as 2.0% after several analysts had suggested the possibility of a potential power tariff hike.

At 4.03pm, the stock was traded at RM12.22, up 16 sen or 1.3%, with some 9.0 million shares done.

Earlier, Tenaga was among the top gainers on the bourse, rising as much as 24 sen or 2.0% to its intraday high of RM12.30.

Asia Analytica wrote in a note today that Tenaga may see a tariff hike soon, as the new tariff mechanism allows for a review of fuel costs every six months, which is due in July.

“We suspect under ideal conditions, Tenaga should be getting another tariff hike – albeit smaller than the 4.99 sen per unit hike in January – to compensate for higher actual fuel costs,” said the research house.

However, the research house added that a raise in electricity rates in the near-term seemed unlikely, considering the current impact from inflation on businesses and consumers.

“If so, then Tenaga would have to absorb the higher actual fuel costs – blunting the earnings boost from January’s tariff increase to a certain degree,” said Asia Analytica.

Another report by CIMB Investment Bank Bhd had said that the recent coal power plant outages had caused Tenaga to use the more expensive liquefied natural gas to meet demand.

“Given its higher usage of more expensive gas, Tenaga's fuel costs could have risen above the assumed level used to calculate its tariff hike in Jan 2014.

“This implies that Tenaga may need another tariff hike to pass on its higher fuel cost,” CIMB said.