Friday, October 29, 2010

Maybank IB Research: Sell Tenaga

KUALA LUMPUR: Maybank Investment Bank Bhd Research (Maybank IB) sees more challenges ahead for TENAGA NASIONAL BHD [] and has a Sell call with an unchanged target price of RM7.50.

The research house said on Friday, Oct 29 that its 4Q net profit plunged 23% on-quarter to RM414 million on seasonally high "other costs" and rising coal prices.

"The final dividend was raised to 20 sen/share, but the 3% gross full-year yield is still not particularly compelling. We tweak our EPS forecasts on post-result housekeeping and still expect FY11 net profit contraction on higher coal prices," it said.

Maybank IB Research said the market had focused on its low 13% foreign ownership and gains from a weak US dollar.

"However, we see higher coal prices and gas supply constraints as the key issues. We maintain our below-consensus earnings forecasts. It could be even worse if gas supply constraints force Tenaga to burn costly distillate to meet power demand growth," it said.

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