TNB ‘still attractive’ despite Q3 loss
KUALA LUMPUR: Analysts remain bullish on Tenaga Nasional Bhd’s (TNB) near-term outlook, despite reporting lower net profit in its third quarter due to higher fuel costs from piped gas price, higher average coal prices and weak ringgit.
The national utility firm, with more than RM80 billion in market capitalisation, posted a net profit of RM1.96 billion, 14.9 per cent lower from RM2.31 billion in the same period a year ago.
TNB still had 17 “buy” calls and only two “hold” and two “sell” recommendations yesterday.
It opened lower at RM14.18 compared with its closing price of RM14.24 on Thursday, but gained momentum to breach the RM14.18 level in the morning.
TNB closed eight sen lower to RM14.16 yesterday.
Hong Leong Investment Bank said TNB’s earnings and cash flow are expected to be stable due to the implementation of the incentive based regulation (IBR) or fuel-cost-pass-through (FCPT) mechanisms.
“The expected IBR revision to lower returns on regulated assets by 2018 would be offset by new contributions from associates and power plants,” it said.
MIDF Research said TNB’s earnings should improve from this month onwards.
“The margin compression from higher effective fuel cost should be temporary given the utilisation of RM1.3 billion power purchase agreement (PPA) savings to compensate TNB from July onwards,” it said.
The Imbalance Cost PassThrough should have effectively turned to a surcharge of 1.02sen/kwh instead of a rebate of 1.52sen/kwh given higher fuel cost.
However, the government is subsidising the difference on behalf of consumers for the second half of the year by utilising RM1.3 billion of the RM1.8 billion total PPA savings.