Target Price:RM7.50
Research House: RHB
KUALA LUMPUR: RHB Research Institute is maintaining its fair value of RM7.50 for TENAGA NASIONAL BHD [] (TNB) based on unchanged target CY11 PER of 13 times.
The research house said TNB lacks catalysts due to slowing electricity demand growth of 4.5% for FY11 (FY10: 8.8%) and no clear timeline for a formal fuel cost pass-through formula to help address the issue of fluctuating fuel prices.
It said TNB was expected to release its 1QFY11 results on Jan 19. With higher electricity unit sales growth and largely stable coal prices in 1Q, 'we estimate 1Q core net profit could come in at around RM700-800m (4QFY10: RM414m, 1QFY10: RM751m)'.
RHB Research expects 1QFY11 total operating cost to remain stable on-quarter, as it understands TNB's average coal price for 1QFY11 stood at US$100 a tonne, in line with management's guidance.
'Looking ahead, while the RM continues to strengthen against US$, we believe it is unlikely to be sufficient to mitigate the sharp rising trend in US$-denominated coal cost due to the floods in Queensland, Australia,' it said.
Source: The Edge, 18 Jan 2011
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