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CIMB Research downgrades Tenaga to Neutral
by hlk Fri 19 Aug 2011, 12:09
KUALA LUMPUR: CIMB Equities Research has downgraded TENAGA NASIONAL BHD [] from Trading Buy to Neutral and reduced the target price from RM7.60 to RM6.77.
The research house said on Friday, Aug 19 that Tenaga’s comment that gas supply has not recovered was a negative surprise as it had said during its 3QFY8/11 results that supply would recover.
“After speaking with management, we cut FY11-12 core net profit by 13%-15% and FY11-12 DPS by 12%-13% as we were too optimistic even after slashing our numbers after the 3Q results.
“Our target falls from RM7.60 to RM6.77 due to lower earnings and the lowering of our target P/BV from 1.4x to 1.25x as we apply a higher risk premium,” it said.
CIMB Research said it downgraded Tenaga from Trading Buy to NEUTRAL. Although valuations are attractive and gas supply should eventually recover, this is offset by the lack of a robust cost pass-through mechanism.
“While cost sharing with Petronas is possible, there is no definite timeline. We recommend a switch to Petronas Gas,” it said.
The research house said on Friday, Aug 19 that Tenaga’s comment that gas supply has not recovered was a negative surprise as it had said during its 3QFY8/11 results that supply would recover.
“After speaking with management, we cut FY11-12 core net profit by 13%-15% and FY11-12 DPS by 12%-13% as we were too optimistic even after slashing our numbers after the 3Q results.
“Our target falls from RM7.60 to RM6.77 due to lower earnings and the lowering of our target P/BV from 1.4x to 1.25x as we apply a higher risk premium,” it said.
CIMB Research said it downgraded Tenaga from Trading Buy to NEUTRAL. Although valuations are attractive and gas supply should eventually recover, this is offset by the lack of a robust cost pass-through mechanism.
“While cost sharing with Petronas is possible, there is no definite timeline. We recommend a switch to Petronas Gas,” it said.
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