Hot Stock 1MDB's talks on power sale to Chinese might relief Tenaga's bid; share price rises

by **Cals** Mon 23 Nov 2015, 22:14

Hot Stock

[size=28]1MDB's talks on power sale to Chinese might relief Tenaga's bid; share price rises

By Sangeetha Amarthalingam / theedgemarkets.com | November 23, 2015 : 11:33 AM MYT

KUALA LUMPUR (Nov 23): Reported talks on the purported sale of 1Malaysia Development Bhd (1MDB)’s power business, Edra Global Energy Bhd, to a Chinese-led bidding group, might provide relief among Tenaga Nasional Bhd ([You must be registered and logged in to see this image.] Valuation: 1.20, Fundamental: 1.30)’s shareholders, evidenced in the share price rise to 2.59%.

At 11.08am, Malaysian power producer Tenaga went up 34 sen, after paring gains at 36 sen in early trade to RM13.46, with 4.6 million shares done, for a market capitalisation of RM74 billion.

On Friday (Nov 20), Bloomberg, quoting people with knowledge of the matter, reported that 1MDB was nearing an agreement to sell control of its power business to a consortium, which includes China General Nuclear Power Corpand Qatar’s Nebras Power QSC.

Bloomberg said the deal could value Edra Global, 1MDB’s power unit, at about RM10 billion (US$2.3 billion), trumping Tenaga’s offer.

Bloomberg was told by the people that the deal would be conditional on the China General Nuclear consortium being able to obtain at least 50% of the business.

“An agreement hasn’t been signed yet and talks could still fall apart,” the report said.

To recap, on Oct 17, Tenaga submitted a conditional offer to acquire Edra Global’s 13 power generation assets, subject to its finalisation of confirmatory due diligence process, and finalisation and execution of the share purchase agreement.

Tenaga did not disclose its offer price for the bid, which did not settle with shareholders and analysts who viewed it as a bailout of debt-ridden 1MDB.

Meanwhile, Public Investment Bank Bhd reaffirmed its “outperform” call on Tenaga, due to the company’s nature and undemanding valuation, which is trading at financial year 2016F and 2017F, at 10.6 times and 10.3 times respectively.

“We are neutral on this development, as contribution from the project, while positive, is not expected to be significant. Nevertheless, the latest development might provide some relief to investors on concerns of a bailout and/or overpayment.

“We introduce our FY18F numbers and roll-over our DCF valuation to FY17F, bringing our target price to RM14.97,” it added.

(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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