Affin Research maintains Reduce on Tenaga

KUALA LUMPUR: Affin Investment Research is maintaining its Reduce recommendation on Tenaga Nasional
with an unchanged target price of RM6.12, which is a 15% discount to
its discounted cashflow of RM7.20 a share, discount rate of 7.5%;
growth of 3.0%.
The research house said on Tuesday that Tenaga's MoU with PT PLN, the Indonesian state owned utility company involved in generation, transmission and distribution of electricity and PT Bukit Asam, would not have any near-term earnings impact.
The
MoU, which was signed on Monday, is for two years and will cover the
construction of a 275KV interconnection line from Telok Gong, Melaka to
Garuda Sakti, Sumatera and the development and construction of a mine
mouth coal fired power plant in Peranap, which is 250km south east of
Pekanbaru, Sumatera.
"No near-term earnings impact on Tenaga as
we understand that the coal-fired power plant will likely only commence
operations in 2017. We estimate that the coal-fired power plant will
likely cost some US$1.3mil a MW, if not more.
"Thus, the power
plant itself should cost approximately RM4.1bil. The undersea cable
(assuming similar cost structure as the aborted Bakun undersea cable
project) can potentially cost up to RM1bil (RM15mil per km)," said
Affin Research.