- We reiterate our
BUY call on Tenaga Nasional (Tenaga), with an unchanged DCF-derived fair value
of RM7.95/share, which implies an FY13F PE of 12x and a P/BV of 1.2x.
- Business Times
reported that the Energy, Green Technology and Water Minister Datuk Seri Peter
Chin has said that the government’s decision to raise electricity and gas
tariffs will be made in December this year. His ministry has recommended to the
Economic Council for the tariff increase to reflect market prices.
- The last hike in
gas and electricity prices was on June 1 last year, when natural gas price for
the power sector was raised by 28% to RM13.70/mmbtu from RM10.70/mmbtu while
the average electricity tariff rose 7% to 33.5 sen/kWh. Recall that the
530mmscfd Lekas regassification plant in Malacca is expected to begin operation
in mid-October this year, a slight delay from this month. But the pricing for
this new natural gas supply, which will be imported from the Middle East, has
not been announced by the government.
- Currently,
Peninsular Malaysia’s natural gas supply constraints have led to Petronas supplying
only 1,050-1,100mmscfd vs. its stipulated 1,350mmsfd to the power sector. Based
on Japan’s imported gas price of US$18.8/mmbtu and assuming a premium of 20% to
account for the regassification and transportation costs, we estimate that the
power sector’s average gas price could rise by 49% to RM20.5/mmbtu. This can be
offset by an electricity tariff hike of 8.5%. But pending the upcoming general
election, we expect Petronas to absorb the increased imported gas costs, which
will mitigate Tenaga’s fuel cost pressures.
- Until the general
election results alleviate tariff rebalancing concerns, near-term catalysts for
Tenaga’s re-rating stem from:- (1) Stronger QoQ 4QFY12 earnings, driven by a
drop in Newcastle coal cost by 15% QoQ or US$16/tonne and 4% QoQ increase in
natural gas supply to 1,000mmscfd; (2) Tenaga’s stronger earnings outlook will
be underpinned by the likely continued cost-sharing formula between Tenaga,
Petronas and the government for the additional distillate and oil costs arising
from the shortfall in natural gas below the 1,250mmscfd threshold; and (3)
Tenaga will benefit from lower fixed capacity charges due to the upcoming
tenders for new power plants (such as the 1,000-1,400MW Prai combined gas-cycle
plant) and the likely extension for over half of the first generation power purchase
agreements which will be announced next month.
- The stock currently
trades at a P/BV of 1x, at the lower range of 1x-2.6x over the past 5 years.
Earnings-wise, Tenaga offers an attractive FY13F PE of 10x, compared with the stock’s
three-year average band of 10x-16x.
Source: AmeSecurities
No comments:
Post a Comment