TNB 2Q net profit up 24.4% on lower generation costs

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KUALA LUMPUR (Apr 27): Tenaga Nasional Bhd (TNB) saw its net profit for the second financial quarter ended Feb 28, 2015 (2QFY15) rise 24.4% to RM2.16 billion from RM1.73 billion a year ago, on lower generation costs due to lower coal price and lower usage of the more expensive liquefied natural gas (LNG) fuel.

Revenue for 2QFY15 rose 6.1% to RM10.61 billion from RM10 billion in 2QFY14, mainly due to higher sales of electricity in Peninsular Malaysia and Sabah, which recorded an increase of 12.6% and 14.2% respectively, thanks to a hike in the average electricity tariff.

In a filing with Bursa Malaysia today, TNB (fundamental: 1.3;valuation: 1.8) said the average electricity tariff in Peninsular Malaysia and Sabah rose 14.9% and 16.9% respectively, effective Jan 1, 2014.

For the six months period ended Feb 28, 2015 (1HFY15), TNB recorded a net profit of RM4.51 billion, which was 29.4% higher than 1HFY14 net profit of RM3.48 billion, mainly due to increased revenue and a decrease in operating expenses.

Revenue for 1HFY15 rose 9.2% to RM21.64 billion from RM19.57 billion a year ago, which was the result of the improvement in sales of electricity in Peninsular Malaysia and Sabah, by 15.8% and 17.4% respectively.

However, the imbalance cost past through (ICPT) process has yet to be automatically effected. When fully effected, the group results will need to reflect the over-recovery amounting to approximately RM1.5 billion (net of tax), which is subject to final confirmation.

The ICPT is a mechanism under the incentive based regulation (IBR) framework, allowing TNB as the national utility to reflect changes (either an increase or reduction) of the fuel and other generation costs in the electricity tariff every six months.

In a statement today, TNB president and chief executive officer Datuk Seri Azman Mohd said the current global economic environment will bring forth new challenging landscape for the group.

“The changing global environment will not deter us away from our aspirations, that are to excel in the current regulatory environment and to expand our presence in the unregulated business environments.

“The commissioning of Manjung 4 [power plant] and our recent success in a strategic acquisition proved that TNB will always remain resolve on our path towards sustainability and growth, regardless of any setbacks thrown to us,” he said.

TNB shares closed unchanged at RM14.60 today, with a market capitalisation of RM82.4 billion.

(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.)