ASEAN KEY DESTINATIONS
Utility hits 52-week low
Tenaga Nasional Bhd (TNB) dipped briefly to its 52-week low of RM5.07, 31 percent lower than the RM7.39 it recorded a year ago, with negative news saying that TNB may incur additional fuel cost of up to RM 3billion. However, research houses are still maintaining their views on the utility giant. The company shed nine sen to end at RM5.12 yesterday with 5.615 million shares changing hands.
CIMB Research said it was a negative surprise as TNB will have to spend extra on alternative fuels and would need a cash call to fund operations should the gas shortage persist.
“We estimate for every RM500mil, TNB would need to issue 95 million shares, diluting fiscal year 2012 earnings per share by 1.8%,” it said in a report yesterday, adding that it believed TNB might not announce any more dividends for the rest of 2011.
On Tuesday, TNB chief executive officer Datuk Seri Che Khalib Mohamad Noh said the company’s fourth quarter performance would be bad and his earnings estimate for 2011 had gone haywire and had been cut by more than 50 percent, marred by a continued gas supply shortage.
Its “neutral” call was maintained and it said although valuations were attractive, it was offset by the absence of a robust cost pass-through mechanism.
It said the gas shortage might only be permanently resolved by the second half of 2012, when Petronas Gas’s regasification terminal in Malacca is operational and Malaysia begins importing liquefied natural gas at market prices.
To be noted, the market price of natural gas is three to four times higher than Malaysia’s RM13.70 per mmbtu (million metric British thermal unit) subsidised price.
“While TNB has indicated in the past that it will not pass on the additional costs to consumers, it remains to be seen who will absorb the additional gas costs,” it said while reducing its target price to RM6 from RM6.77 previously.
Meanwhile, OSK Research maintained its “buy” call on the utility giant, adding that TNB’s share price has slid some 23 percent since early July.
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