KUALA LUMPUR: Tenaga Nasional Bhd's (TNB) net profit of RM2 billion (excluding forex) for its first quarter this year is in line with Maybank Investment Bank Bhd's (Maybank IB) expectation as its represents 28 to 30 per cent of the latter's consensus full-year forecast.
The investment bank said in a research note that year-on-year comparison was not "like-for-like" as first-quarter 2015 net profit included surplus earnings from cost over-recoveries.
"Generation for the quarter grew 3.3 per cent on the back of corresponding 3.2 per cent demand growth," it said, adding that system loss trended down sequentially to just 7.8 per cent.
Maybank IB said fuel mix improved sequentially due to a 5.2 percentage point spike in coal's proportion of total generation.
This was coupled with still-depressed coal and liquefied natural gas prices. The fuel cost over-recovery for first quarter of this financial year stood at RM682 million, it said.
"The resolution of the RM2 billion tax dispute remains a work-in- progress. (The group's) management expects to be able to continue recognising reinvestment allowances, and is thus keeping the tax rate guidance (in the teens) unchanged."
TNB continues to be Maybank IB's top pick for the sector (and the market), and the investment bank reiterated its "buy" call on the stock with a target price of RM16, derived from a discounted cash flow, assuming 7.5 per cent weighted average cost of capital and one per cent long-term growth.
"Our price implies 12.5 times 2016 price-earnings ratio. TNB is presently appealing the RM2 billion tax charge, but we note this represents less than three per cent of its current market cap," it added.
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