KUALA LUMPUR (June 22): The additional provision by Tenaga Nasional Bhd (TNB) of RM100 million for electricity bill discounts and waivers under the Bantuan Prihatin Elektrik Tambahan (BPET) announced over the weekend came as a surprise to analysts.

However, the BPET is also a good thing for TNB, considering that the additional support from the government will reduce risk to the company in terms of receivables.

To recap, TNB has agreed to fund RM100 million out of RM942 million support under BPET to domestic users for discounts and waivers for the April-June period.

This is on top of RM150 million pledged by the utility firm under the previous round of tiered electricity tariff rebate under Bantuan Prihatin Elektrik (BPE) for domestic customers.

The BPET rebate will be reflected in the July bill, which falls in TNB's third quarter ending Sept 30, 2020 (3QFY20).

"We are surprised by the announcement of BPET and to know that the group is setting aside another RM100 million for the rebates," said CGS-CIMB Research in a note today.

"We cut our FY20-22 earnings per share (EPS) estimates by 0.04-1.6% to factor in the additional corporate social responsibility (CSR) expenses," the research house said.

CGS-CIMB Research has maintained "add" on the company with a target price of RM14.20 or 15 times FY21 price-to-earnings (P/E) ratio forecast.

At its current price of RM11.78, the counter is trading at 13.9 times FY20 P/E based on a core FY20 EPS forecast of 85 sen.

Meanwhile, PublicInvest Research pointed to the balance of the BPET to be funded by the Kumpulan Wang Industri Elektrik fund.

"This will also help to mitigate TNB's credit risk in relation to the domestic sector for April-September 2020, as the government will now underwrite potential delinquencies from this customer segment," PublicInvest Research said today.

The research house also said the net effect of TNB's RM250 million total CSR support will be lower due to anticipated tax savings from the deductible expenses.

"We deem it manageable at <5% of our FY20F net profit [of 87.1 sen EPS]," it said.

At least for 2QFY20, the measures would help reduce risk of TNB to recognise impairments on receivables for delinquent accounts previously raised by analysts.

However, at this point the risk is more apparent for industrial and commercial customers — which are not included in BPE or BPET — considering tightening cash flow of businesses due to the impending economic slowdown.

In FY19, around 73% of energy produced by TNB was sold to industrial (38.6%) and commercial (34.8%) clients.

The KLCI component stock currently has 16 "buy" calls and seven "hold" calls, with a consensus target price of RM13.95. The counter last traded unchanged at RM11.80, valuing the group at RM67.09 billion.