Hot Stock Tenaga falls on broader market losses, 1MDB power project

by **Cals** Mon 06 Jul 2015, 23:22

Hot Stock
Tenaga falls on broader market losses, 1MDB power project

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By Chester Tay / theedgemarkets.com | July 6, 2015 : 12:53 PM MYT

KUALA LUMPUR (July 6): [size=14]Tenaga Nasional Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) fell as much as 30 sen or 2.4% amid broader market losses and after the state-controlled utility said it was buying a 70% stake in 1Malaysia Development Bhd (1MDB)'s Negeri Sembilan electricity generation project.

Last Friday (July 3), Tenaga (fundamental: 1.3; valuation: 1.8) said it signed a share sale and purchase agreement with 1MDB to acquire 1MDB's 70% stake in Jimah East Power Sdn Bhd for some RM46.98 million. Jimah has been tasked to undertake a 2,000MW power generation project, which is known as Project 3B.

The price for the Jimah stake is below Project 3B's development cost of about RM83.68 million, registered by 1MDB as at April 17 2015, according to Tenaga.

Today, Tenaga's shares fell to its lowest so far today at RM12.38. The counter pared losses at 12:30pm to settle at RM12.54, with about two million shares done.

For comparison, the FBM KLCI fell 22.6 points or 1.3% to settle at 1,711.64, on Greece's debt concerns and as investors eyed Malaysia's political backdrop.

Malaysia's political backdrop made headlines after news reports, quoting Wall Street Journal (WSJ), alleged state-owned 1MDB had deposited some US$700 million (RM2.67 billion) into Prime Minister Datuk Seri Najib Tun Razak’s bank account.

Reuters, quoting WSJ, reported Najib had close to $700 million in deposits from troubled state fund 1MDB wired into his personal account. WSJ's report was based on documents from a government probe on 1MDB.

On Tenaga, analysts foresee selling pressure on its shares, despite reasonable purchase cost for the Jimah stake.

Kenanga Investment Bank Bhd analyst Teh Kian Yeong said Tenaga would continue to face selling pressure, as 1MDB issues remained unsettled.

“In all, we are positive on the acquisition, given the reasonable purchase cost. However, we maintain our opinion that so long as 1MDB’s asset sales of the remaining brownfield power plants (under Edra Global) is not settled, Tenaga’s share price will continue to come under pressure, on fears of overpaying in case of it acquiring the assets,” Teh said in a research note today.

(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.)
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