KUALA LUMPUR: TENAGA Nasional Bhd's (TNB) outlook brightens as some analysts re-grade it upwards now that the overhanging issue of the national utility company being one of the contenders for 1Malaysia Development Bhd's (1MDB) power assets has been removed.
Kenanga Research said the announcement acts as a major price catalyst for TNB as the market will no longer be concerned over TNB overpaying for the 1MDB power assets, which could trigger another round of re-rating or a selldown of its shares.
"The change in ownership of 1MDB's energy assets to China General Nuclear Power Corp (CGN) will not affect TNB as an energy off-taker as all capacity payments from these power plants are backed by power purchase agreements," Kenanga Research said in its note to investors yesterday.
On Monday, 1MDB disposed of its entire stake in its energy assets for RM9.83 billion to the China company.
The market reacted positively with the FTSE Bursa Malaysia KLCI rallying 0.36 per cent to close at 1,677.03 points, its highest in two weeks, while the ringgit gained against the US dollar at 4.2425, the highest among emerging-market currencies in Asia.
TNB's share price, which has been under pressure since June, reached a six-month high yesterday, peaking at RM13.58, up 1.1 per cent from RM13.42 on Monday.
TNB shares have been soft since it indicated its interest in acquiring Edra Global Energy, which sent their price down to as low as RM10.26 in end-August, from a peak of RM16.96 in early February.
In a separate research note, RHB Research Institute said the uncertainty surrounding a potential sizeable new acquisition by TNB has now been effectively removed.
"We believe the latest announcement by 1MDB over the sale of its energy assets have resulted in a lower premium for TNB shares, making it attractive," it said.
On TNB's operations, Kenanga Research expects the firm's future earnings to depend mainly on TNB's operational efficiency," it said.
"With new coal-fired plants back in action recovering from their outages in the third quarter this year, coupled with the Janamanjung Unit 4 Plant which has already commenced in April, coal generation mix will increase in the future and this should help to bring down fuel cost further."
Kenanga Research upgraded TNB shares to "outperform" from "market perform" previously, with an increased target price of RM15.42 from RM12.90.
RHB Research, meanwhile, maintained a "buy" call on TNB, with an increased target price of RM18.20.
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