KUALA LUMPUR, July 29 — Shares of Tenaga Nasional Bhd (TNB) rose this morning, as sentiment was spurred by its bullish third quarter (Q3) financial year (FY) results ended May 31, 2016, announced yesterday.
As at 9.43am, TNB advanced eight sen to RM14.40 with 2.72 million shares changing hands.
During the quarter, TNB’s pre-tax profit expanded to RM2.53 billion from RM734.90 million in the same quarter last year, while revenue increased to RM12.13 billion from RM9.90 billion previously.
Given the strong results, TNB has taken the opportunity to provide for bad debts of RM526 million in the quarter.
The provisions are related to receivables from iron and steel industry players, given the on-going tough operating climate.
Following this, Hong Leong Investment Bank (HLIB) has increased its earnings forecasts for TNB’s FY16 by 11.2 per cent, FY17 by 10.6 per cent and FY18 by 6.9 per cent on the favourable revenue and generation mix.
The research house was positive based on the implementation of incentive-based regulation and the fuel cost pass-through mechanism, which eliminates uncertainties about future earnings, and higher coal generation mix to improve margins.
HLIB has maintained its ‘Buy’ call on TNB with a higher target price of RM17.50 from RM16.50 set previously.
Another research firm, Affin Hwang Capital, has reaffirmed its ‘Buy’ recommendation on TNB with unchanged target price of RM16.50.
“We still like TNB for its undemanding valuation and growing generation market share. Stronger-than-expected electricity demand growth and earnings are key potential catalysts.
“TNB remains a top pick,” it said in a note today. — Bernama
