Tenaga rises 3% as crude oil prices hit 5-year low

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KUALA LUMPUR (Dec 9): Tenaga Nasional Bhd rose as much as 2.7% or 38 sen to RM14.24 as crude oil prices fell to its lowest in five years.

State-controlled utility Tenaga is seen as a beneficiary of lower crude oil prices as cheaper fuel will translate into lower electricty generation cost.

Reuters reported that the US crude futures fell to the lowest in more than five years on expectations that a deepening oil glut would keep prices under pressure next year.

US crude for January delivery dropped as low as US$62.25 a barrel, before trading at US$62.88 by 0017 GMT, down 15 cents. The session low was its weakest since June 2009, and followed a 4.2-percent fall on Monday.

Today, Tenaga reduced gains at 11.11am to trade at RM13.98 with some two million shares done. The counter was the seventh-largest gainer on Bursa Malaysia.

For comparison, the FBM KLCI fell 5.87 points or 0.34%.

A remisier told theedgemarkets.com sentiment was bullish for Tenaga in a period of low commodity prices.

He said the market was switching from other stocks like oil and gas related entities to stocks like Tenaga, which was seen benefitting from low prices of coal and oil

“As long as oil prices continue to trace downwards, Tenaga will keep coming in (to the picture), as local fund managers will also try to stock their portfolio with fundamental stocks,” the remisier said.

He noted that Tenaga uses oil and coal to produce electricity. The remisier said Tenaga shares “still has legs to rally”.

While cheaper fuel is a boon to Tenaga, it is worth noting that a weaker ringgit versus the US dollar means the company's substantial US dollar-denominated loans will increase in ringgit terms.

The ringgit was traded at 3.4930 to the US dollar at 12.03pm today compared to the firmest point at 3.1415 over the last six months.

Tenaga's latest financials showed that the company had borrowings amounting to RM25.46 billion as at August 31, 2014. Of the amount, US dollar loans came to RM2.64 billion.