KUALA LUMPUR, Feb 10 — Maybank Investment Bank (Maybank IB) has maintained its “hold” call for Tenaga Nasional Bhd (TNB) shares on the expectation that concerns over the imbalance cost pass-through (ICPT) mechanism will dissipate in the next 12 to 24 months.
Maybank IB said ICPT concerns would dissipate given falling coal prices, a growing track record of timely payments by the government and possibly reduced government resistance to future tariff surcharges.
“TNB has emerged from the worst of the coal price escalation relatively unscathed, in our view, having successfully addressed the associated issues, such as the integrity of pass-through, higher working capital cost and rising receivables,” it said.
TNB’s rising receivables are largely due to the increase in its “under-recoveries,” it added.
“Concerns over the timeliness of the government’s payment have thus far been unfounded, with the government paying its dues on at least a monthly basis (similar/better than a tariff surcharge).
“For the RM10.8 billion pledged by the government for the first half of 2023, TNB has to date collected RM4 billion, the dues for the Jan-Feb 2023 period,” it noted.
The research house reckons that the government’s rhetoric on targeted subsidies and the raising of surcharges for high-voltage industrial customers potentially signal reduced resistance to future tariff surcharges.
Maybank IB said TNB’s risk profile “is thus improved but priced in to some extent given the share price run-up since the release of third quarter 2022 results.”
Thus the research house is maintaining its “hold” call on TNB with a higher RM10 discounted cash flow-based target price. — Bernama
