KUALA LUMPUR (Aug 6): CGSCIMB Research has maintained its “Add” rating on Tenaga Nasional Bhd at RM13.86 with a lower target price of RM15.30 (from RM15.40) and said Tenaga has set clear growth targets and strategies for the group and the two new holding companies – GenCo and RetailCo.
In a note Aug 5, the research house said it lowered its FY19-21F EPS estimates by 1-1.4% to factor in the higher operating expenses from the upcoming restructuring expenses (estimated to be circa RM150 million over 2 years).
“Our target price is revised to RM15.30, still based on the sector average FY20F P/E of 15x.
“We like Tenaga as: (i) the regulatory risk from sector reforms seems to be low, as it will likely maintain its monopoly in the T&D segment, and (ii) it is one of the cheapest big cap counters, with a decent dividend yield of c.4% for FY19-21F.
“Stronger-than-expected earnings from associates are a key potential re-rating catalyst. The key downside risks are weaker contribution from associates and potential sector reforms that significantly impact Tenaga’s earnings,” it said.