TENAGA Nasional Bhd’s potential listing of its power generation business (GenCo) is unlikely to not have any material fundamental impact to the Group although it will allow the power utility giant to improve its segmental business focus as well as reporting transparency.
In stating that the move will have neutral impact on Tenaga, Hong Leong Investment Bank (HLIB) nevertheless expects the listing exercise to put Tenaga in a better footing in anticipation of the on-going industry transformation and in the quest of raising new capital for GenCo.
Yesterday, Bloomberg reported that Tenaga is considering listing its GenCo on Bursa Malaysia in 2021 following completion of its on-going corporate re-structuring exercise.
Upon listing, investors would be given shares in the unit in proportion to their existing holdings in the power utility company.
“However, we do not expect material fundamental changes to Tenaga’s business outlook,” wrote analyst Daniel Wong in a company update.
Based on a back of envelope calculations, HLIB Research expects the GenCo’s net profit to be circa RM1 bil with potential market valuation of up to RM13 bil upon listing (based on current 13x price-to-earnings ratio similar to Malakoff Corp Bhd).
All-in, HLIB Research maintained its “buy” rating on Tenaga with an unchanged target price of RM12.50.
“Tenaga’s earnings and cash flow are expected to be stable under the incentive-based regulation/imbalance cost pass-through mechanism. Dividend is expected to remain stable at 50-60sen/share,” added the research house.
At 11.13am, Tenaga was up 54 sen or 5.26% to RM10.80 with 4.6 million shares traded, thus valuing the company at RM61.61 bil. – Nov 10, 2020
