Friday, October 29, 2010

Tenaga slips, more headwinds ahead

KUALA LUMPUR:TENAGA NASIONAL BHD []'s share price slipped in late afternoon on Friday, 29, as analysts expected more challenges ahead, with Maybank Investment Bank Bhd Research (Maybank IB) maintaining a Sell call with an unchanged target price of RM7.50

At 3.48pm, Tenaga was down five sen to RM8.82. There were 8.32 million shares transacted at prices ranging from RM8,81 to RM8.88.

Maybank Research said it expected more challenges ahead for Tenaga due to higher higher coal prices and gas supply constraints.

It said the power giant's 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 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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