STOCK FOCUS OF THE DAY
Tenaga Nasional : Significant boost from full quarter tariff
impact
BUY
We maintain our BUY call on Tenaga Nasional with an
unchanged DCF-derived fair value of RM15.00/share.
We have fine-tuned Tenaga’s FY14F-FY16F earnings as our
lower tax assumptions are largely offset by a 1ppt reduction in electricity
demand growth forecast to 3% from 4%. Tenaga’s 9MFY14 core net profit
(excluding forex gains of RM292mil) of RM4,823mil came in within our expectations,
Tenaga did not declare any interim dividend in 3QFY14 as expected.
But Tenaga’s FY14F consensus net profit of RM4,999mil, which
is almost near the 9MFY14 results, may not be comparable as street estimates
may not have included one-off reinvestment allowances and deferred tax
write-backs announced in 2QFY14.Tenaga’s 3QFY14 core net profit declined by 13%
QoQ to RM1,552mil largely due to the positive tax charge in 2QFY14.
But normalising tax rates in 2QFY14, we note that Tenaga’s
3QFY14 core net profit would have surged by 28% due to the full quarter impact
of the 3ppt net tariff increase effective in mid-January this year and the
cessation of bearing 1/3 of the liquefied natural gas costs (LNG).
The surge in 3QFY14 earnings reaffirms our conviction that the
recent tariff hike will continue to propel Tenaga’s re-rating momentum forward.
Additionally, coal prices have fallen below US$70/tonne (see chart 3), compared
to US$76.50/tonne in 9MFY14 and the new tariff structure’s US$87.50/tonne base.
But for now, we maintain our FY14F-FY16F coal assumption of
US$85/tonne. Tenaga offers a fair FY15F PE of 11.2x, compared with the stock’s
3-year average band of 10x-16x. Foreign shareholders have been progressively
selling down the stock from a peak of 27.8% in December 2013 to 25.4% in May
this year.
Others :
Economic Update : Inflation accelerates in June due to
higher costs for food and non-food segments
QUICK TAKES
DRB-Hicom : Deal completion marks exit from insurance
business
BUY
Genting Singapore : Implications of MBS’ 2QFY14
results
BUY
Auto Sector : Developing sector
risk OVERWEIGHT
Water Sector : HoA expected to signed in two
weeks NEUTRAL
NEWS HIGHLIGHTS
Perodua : Perodua revises down sales target
Sasbadi Holdings : Sasbadi’s public issue oversubscribed by
33.15 times
Media Sector : Media adex rises to RM6.8bil in 1H
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