TNB’s 2Q19 results within expectations


TENAGA Nasional Bhd’s (TNB) second-quarter (2Q19) financial performance came in within expectations, according to research houses.

MIDF Research highlighted the power utility recorded strong demand growth domestically, increasing 4.4% year-to-date (YTD) and 3.6% year-on-year (YoY) during the April to June period.

“TNB reported 2Q19 core earnings of RM1.4 billion, bringing 1H19 core earnings to RM3 billion.

“This is within both our and consensus’ estimates accounting for 53.7% and 53.4% of financial year 2019 (FY19) respectively,” the research house said.

The research firm added TNB’s associates have returned to the black, registering an RM82 million contributions in 1H19 versus losses of RM79 million in 1H18.

“This was largely driven by earnings improvement at all the overseas associates, particularly Vortex Solar Investments, driven by higher generation and increased electricity price,” it said.

MIDF has placed a ‘Neutral’ call with a target price of RM14.40, after its shares hit a low of RM11.36 in May this year.

Hong Leong Investment Bank Bhd (HLIB) said the implementation of the new accounting standard, Malaysian Financial Reporting Standard, has resulted in an increase in net operational and finance costs of RM135 million in 2Q and RM112 million in its first six months of the year.

Commenting on the proposed Malaysia Energy Supply Industry (MESI) 2.0 policy, the research house sees no material impact on TNB despite expectations the policy will introduce competitive elements within the power sector (power generation and power retail).

“We expect TNB’s main asset, power transmission and distribution, to be protected under regulatory asset base structure, while its ongoing power generation assets to be protected under the power purchase agreement structure for their remaining period,” it said in a research note yesterday.

MESI 2.0 aims to accomplish three agendas — to increase industry efficiency; future-proof the industry structure, regulations and key processes; as well as empower consumers and democratise and decentralise the electricity supply industry.

HLIB has a ‘Hold’ call with a target price of RM13.65 on TNB as it believes the current share price reflected the fundamentals of the group.

“TNB earnings are expected to be sustainable at current level with stable cashflow and dividend payout.

“A first interim dividend of 30 sen per share would imply potential full-year dividend at 60 sen per share, translating into potential dividend yield of 4.3% at current share price of RM13.96,” the research house added.

TNB’s share price closed 20 sen lower yesterday to RM13.76, giving it a market capitalisation of RM78.25 billion.