Tenaga erases gains after rising on stronger 2Q financials

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KUALA LUMPUR (Apr 28): Tenaga Nasional Bhd erased gains after rising as much as 20 sen or 1.4% on the state-controlled utility's higher second quarter profit and revenue.

At 10.38am, Tenaga (fundamental: 1.3; valuation: 1.8) traded lower at RM14.58 with some 2.4 million shares transacted. Tenaga had earlier risen to its highest so far today at RM14.80.

Yesterday, Tenaga said net profit rose to RM2.16 billion for its second quarter ended February 28, 2015 (2QFY15) from RM1.73 billion a year earlier. Revenue climbed to RM10.61 billion from RM10 billion.

The company plans to pay a dividend of 10 sen a share for 2QFY15.

In a note today, Affin Hwang Investment Bank Bhd said it maintained its "buy" call on Tenaga shares with an unchanged target price of RM17.50.

Affin Hwang said it liked Tenaga for its decent electricity sales growth amid benign coal prices, which is used for power generation.

“Our target price translates into a target FY16 price-earnings (ratio) of 13.4 times, which looks relatively undemanding.

"Tenaga's 1HFY15 results were within our and consensus expectations as core net profit of RM3.26 billion (-0.2% y-o-y) accounted for 46% and 50% of our and consensus full-year estimates, respectively," said Affin Hwang.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)