POWERING AHEAD
TNB, Ranhill, Malakoff shares set to shine despite termination of 4 projects
were never part of the national utility’s announced pipeline of generation projects.
“These announced projects are not affected. The two cancelled projects have yet to enter into any agreement and were not built into our projections and valuations for TNB,” said MIDF Research, which reaffirmed its positive view on the sector with Tenaga its top pick.
Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin told Parliament on Thusrday the government had decided to cancel four independent power producers’ licences for non-compliance with various conditions.
The projects are gas plants in Kapar and Paka, a combined cycle gas turbine (CCGT) plant in Sandakan, Sabah, and a solar power plant owned by Edra Power Holdings Sdn Bhd.
MIDF Research said the cancellation of CCGT plant had no valuation impact on Ranhill.
“Given the uncertainties surrounding the Sandakan CCGT project, we had already conservatively excluded Sandakan CCGT from our forecasts and valuations for Ranhill,” it said.
Kenanga Research believes the cancellation of a 700 megawatt gas power plant in Kapar owned by Malakoff and TNB would have a neutral impact on Malakoff as this was just a repowering proposal, with the existing power purchase agreement (PPA) still intact.
“Risk of termination on other ongoing PPAs within Malakoff ’s portfolio is low as the termination costs had been embedded in its agreements. The four cancellations should have no termination costs to the government as they are either proposals or recently awarded that have yet to commence.”
Kenanga Research has kept its “outperform” call on Malakoff and lowered its target price of RM1.05, with the stock offering a decent five per cent dividend yields.
MIDF Research said the key catalysts for TNB, which has a target price of RM16.90, included solid dividend yields of 4.6 per cent while valuations were cheap.
It also has reiterated “buy” calls on Ranhill with a target price of RM1.15.
Public Investment Bank Bhd, meanwhile, has upgraded its rating on Malakoff to a “trading buy” given the upside potential to its unchanged target price of RM1.09.
It has maintained its “outperform“call on TNB with an unchanged target price of RM17.81.