6 Apr 2012
In a Bursa announcement, Tenaga Nasional (TNB) announced that its Chief Financial
Officer (CFO), Mohamed Rafique Merican bin Mohd Wahiduddin Merican, 47, has
resigned to pursue better opportunities and career advancement.
A surprise. This piece of news took us by surprise as we had not heard any rumours of
En Rafique leaving. Meanwhile, a corporate day being organized by TNB for investors in
May could be affected by this development.
Appears to be an amicable parting of ways. As far as we understand, there are no
negative developments surrounding En Rafique’s departure. We also understand that
management has already begun the search for a replacement. During En Rafique’s
tenure, TNB continued to pare down its debts despite facing numerous headwinds. At
this juncture, we believe that there will be minimal disruption to TNB’s activities given
that all standard operating procedures should be in place at this long established
Government Linked Company (GLC).
Coal tax conundrum. Sentiment in the company has been slightly doused of late in
view of recent rumours that Indonesia may be slapping a 25% export tax on coal, which
stoked fears of a price hike in coal. While we do see some rationale for an export tax on
mining ores, we see no justification for a coal export tax as there is limited capacity for
local upgrading of coal or value adding in Indonesia prior to export. We believe that
various parties, including miners and importers, will lobby hard to have this tax reduced
or postponed. For now, we maintain our coal cost assumption of USD110 per tonne for
FY12 and FY13.
Maintain BUY. While some parties may choose to read more than is justified in the
resignation of the CFO, particularly given the upcoming departure of CEO Datuk Seri
Che Khalib - who has chosen not to renew his contract when it expires in June, we
believe that a leading GLC like TNB will keep its operations intact. As such, any short
term share price weakness should be viewed as an opportunity to accumulate the
shares. We maintain our earnings forecast and call, pending further clarification from
TNB’s upcoming results briefing on 12 April.
OSK valuation:
Fair value- RM7.68
Previous- RM7.68
Price- RM6.48
[Source]
By Maybank IB research
6 Apr 2012
Maintain Buy, business is good. Despite this negative surprise, we
maintain our positive stance as we believe Tenaga’s past gremlins
have been successfully eradicated. Natural gas supply has improved
since 2012, coal prices have been trending lower and the demand for
power is very strong at 4%-5% growth. Furthermore, we understand
that Tenaga has already received its RM2.0b of the cost sharing
agreement with the Government and PETRONAS in 2QFY12. Any
near-term stock price decline is a great opportunity to accumulate.
Maybank IB valuation:
Share price- RM6.48
Target price- RM6.90
[Source]
By HLIB Research
6 Apr 2012
TNB (HOLD)
Target price- RM6.54
2Q12 to Show Profits
- Improved natural gas supply to the sector, stable coal power generation as well as seasonally lower power demand in 2Q12, had reduced reliance on alternative fuels and lowered overall fuel cost to TNB.
- TNB had received total RM2bn fuel compensation from Government and Petronas in Feb 2012, and will be recognised as an EI item. Note that the amount is taxable at 25%.
- Additionally TNB will recognise another RM660m forex translation gain due to appreciation of MYR against US$ and JP¥.
- Expect TNB to report 2Q12 net profits of RM2.7bn and core profits of RM550m.
- However, we believe TNB will revert back to alternative fuels as power demand is expected to peak in Apr-Aug period, while being hit by seasonally lower hydropower generation.
- Maintain Hold on TNB with Target Price of RM6.54.
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