Internal reorganisation gives TNB boost on Bursa

TNB had on Monday announced an internal restructuring to split power generation and retail businesses into RetailCo and GenCo. — Picture by Saw Siow Feng
TNB had on Monday announced an internal restructuring to split power generation and retail businesses into RetailCo and GenCo. — Picture by Saw Siow Feng

KUALA LUMPUR, July 31 — Tenaga Nasional Bhd (TNB) traded higher on Bursa Malaysia in the early session today following its proposal for internal reorganisation which had been approved by the board of the utility company.

As at 9.37am, TNB stocks rose 26 sen to RM13.88 with 1.86 million shares transacted, making it the best performer among the 30 index-linked stocks. 

On Monday, TNB announced internal restructuring to split power generation and retail businesses into RetailCo and GenCo that would have their board and management teams.

The exercise, expected to be completed by the third quarter of 2020, is to pave the way for the impending market reform.

The announcement was viewed neutrally by many research firms as the proposed internal reorganisation is not expected to have any material impact on the group’s near-term earnings.

They also would not rule out the possibility of two separate listing entities under two segments — RetailCo and GenCo.

Kenanga Research has maintained its ‘Market Perform’ rating with an unchanged target price (TP) of RM13.40, Public Investment Bank kept its ‘Neutral’ with TP of RM14.12 while MIDF Research re-affirmed ‘buy’ call with unchanged TP of RM14.40.

Affin Hwang Capital believed that the new structure could help to reduce concerns over cross-subsidising by the regulators, as the new entities would operate as independent entities moving forward.

It viewed, the reorganisation would likely be sufficient to help convince them to maintain the current Incentive-Based Regulation (IBR) structure for the distribution and transmission (D&T) business.

“Management has indicated that the government do agree with TNB’s view that the D&T business is a natural monopoly and should remain so to maintain capital expenditure efficiency.”

The research firm has reiterated ‘hold’ call with an unchanged TP of RM14.10. — Bernama

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