Date : 01 July 2020
TENAGA NASIONAL BERHAD
Target Price: RM13.40
Call Warrant: TENAGA-C74
Target Price: 0.31 cents
While others are busy and focus on glove stocks cycling. We still remain and believe the positive outlook on this utility giant. Includes the outlook for its good news regarding approval dividend by board of directors, issue 50-year Sukuk Wakalah (RM10bil) and 10 years roadmap plans. We also waiting another good news to be publish on this July. “It’s still a “Buy” and “Hold” for mid/long-term investment.” – Kim
KIM’S TECHNICAL CHART :
TENAGA – After my advice strategy to collect and average your position back on 18th June. Today, we see the chart has move back to the support level on above 11.46. I see it is a bounce signal to move uptrend. It will FLY as long as it follow the red line trend and even higher if break the above green line. With added today announcement high chances for this POWER Counter to spurs!!! Stay tune!!!
WHY STILL UNDERVALUED TODAY?
– TENAGA has a price to earnings ratio of 18.55, based on the last twelve months. That means that at current prices, buyers pay MYR18.55 for every MYR1 in trailing yearly profits.
– TENAGA is trading below my estimate of fair value (MYR12.69)
HIGHLIGHTS ON AGM ANNOUNCEMENT (30 June 2020)
- Approved the highest ever Dividend amounting to RM5.69 Billion for this financial year.
The TNB board of directors had approved a final single-tier dividend of 20 sen per share, raising the single-tier dividend total to 50 sen per share for the financial year ended Dec 31, 2019.
- Submitted 50 years Sukuk Wakalah Programmes provide TNB and its subsidiaries with the flexibility to time its fund-raising exercises with varying nominal value and tenures for optimal asset-liability matching.
The TNB has submitted to the Securities Commission the programmes to sell RM10bil long term 50-year Islamic bonds, as well as short-term, Islamic commercial papers of up to RM2bil.
- 10 years roadmap to strengthen TENAGA position continue to growth in both domestic and international markets.
The TNB would also continue to facilitate the country’s energy transition by enhancing its core infrastructures with digital technology.
MY KEY NOTES:
1. In time of economic difficulty like this, TENAGA still offers resilient earnings with sustainable dividend yield.
2. Demand fell 1.9% YoY in 1QFY20 and management expects overall electricity consumption to drop between 7%-15% this year on the MCO-led slowdown. It had already registered demand decline of 10.0% in Mar when the MCO started and fell sharply by 22.4% in Apr before recovering to fall slower by 10.6% in May as some business resumed. However, this is earnings neutral to TENAGA as any excess or shortfall in revenue cap will be passed through to the customers via revenue adjustment mechanism and this is the same mechanism for price cap for ASP. In 1QFY20, it reported a recovery revenue of RM119.8m for revenue cap and excess revenue of RM219.7m for price cap.
But it will recover by revenue cap. Given the revenue adjustment mechanism, there is no earnings risk for regulated business even as demand is dropping during this depressed market condition
3. Foreign investments. UK Vortex, Wind Ventures and Shuaibah are relatively insulated from Covid-19 impact. Turkey Gama and India GMR are affected by lower energy demand and supply chain disruption. Gama has restructured its loan, which will improve its liquidity, while management is strategizing to monetize GMR assets.
1) Kim’s Posted on TENAGA dated 18th June 2020
2) Announcements Outcome Of General Meeting
3) 50 years Sukuk Wakalah Programmes
We hope you enjoy ready it and support us. We will keep our momentum to write more articles and updates to you.
Good luck and all the best.
Kim & Cheah
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