Friday, October 28, 2011

OSK Research downgrades Tenaga to Neutral, sees losses ahead

KUALA LUMPUR: OSK Research has downgraded Tenaga Nasional to a Neutral and it still sees the company reporting losses for 4QFY11 and 1QFY12.

It said on Friday, Oct 28 it is maintaining its profit forecasts pending the announcement of compensation or a fuel cost pass through. It is maintaining its fair value of RM6.24.

'Even with a potential write-back and the announcement of a new district cooling plant at KLIA2, we are unlikely to raise our FV substantially in the absence of a fuel cost pass through mechanism. As such, we maintain our DCF based FV for now, and downgrade the counter to a NEUTRAL given the limited upside after the recent price rally,' it said.

Tenaga will release its fourth quarter results on Friday evening.

'We maintain our estimates pending this evening's results release although we note that without compensation from Petronas, a disappointment is still likely. Given the limited upside to our RM6.24 DCF derived fair value, we downgrade our call on Tenaga Nasional to Neutral. A clear fuel cost pass through would have to be in place before we upgrade our FV substantially,' it said.

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