- We reiterate our BUY call on Tenaga Nasional, with an unchanged DCF-derived fair value of
RM7.35/share, which implies a CY12F PE of 13x and a P/BV of 1.1x.
- We were introduced yesterday to Tenaga’s president/chief executive
officer-designate Dato’ Ir Azman Mohd, who will be replacing outgoing Datuk
Seri Che Khalib Mohd Noh with effect from 1 July 2012.
- Azman, currently the executive director/chief operating officer,
has been involved in Tenaga’s senior management meetings, and actively involved
in coal purchases and tariff negotiations with regulators.
- He indicated that Tenaga will be focussed on:- 1) building
its capital resources to create a sustainable business model, and
2)non-regulated businesses such as Remaco, which is involved in operations
& maintenance, and has been aggressively expanding in overseas markets.
- Management intends to achieve world class standards in Tenaga’s
key performance indicators by focussing on a holistic asset management policy
for the group’s electricity generation, transmission and distribution divisions.
- Overall, we are positive on this appointment and internal promotion
of a long-serving officer with extensive technical experience within the group.
This means that the strong strategic direction and focus set by the incumbent president/CEO
is likely to be maintained.
- Hence, we remain positive on Tenaga due to:- (1)Stabilising natural gas supply from the
Lekas regassification plant in Malacca by September this year will provide clearer earnings
visibility, (2) Falling global coal price, currently below US$80/tonne, will
positively transform the company’s cost structure, (3) Possibility that Petronas
and the government will continue to bear the higher liquefied natural gas costs
from the Malacca regassification plant, which could mitigate further fuel cost pressures,
(4)Tenders to extend first generation power purchase agreement with independent
power producers are expected to reduce capacity payments, and (5) New power
purchase agreements in an open tender environment with Tenaga as the bidder and
sole off-taker, will further drive the group’s fixed power purchase costs lower.
Source: AmeSecurities
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