25 January 2017 | 1QFY17 Results Review
Maintain BUY
Tenaga Nasional
Unchanged (TP): RM16.80
Healthy demand but higher fuel price next quarter
•
1QFY17 not as weak as expected
•
Lag in impact of coal price uptrend and resilient demand
•
Government might utilise PPA savings to offset impact on
•
RETURN STATS
tariff but this is a finite amount
Price (24 Jan 2017)
RM13.88
Re-affirm BUY at unchanged DCF-derived target price of
Target Price
RM16.80
Expected Share Price
Return
+21.0%
Expected Dividend Yield
+4.1%
RM16.80/share. 4% yield is attractive
Earnings not as weak as expected. Tenaga reported core net profit
of RM1.97b for its 1QFY17. This is broadly in line with expectations
accounting for 28% of our FY17F earnings and 27% of consensus. The
group’s earnings were not as weak as expected but we think earnings
Expected Total Return
+25.1%
over the next two quarters could start reflecting the impact of higher
fuel cost. Tenaga’s 1QFY17 earnings were only 3% lower year-on-year
while revenues were up 5%yoy on the back of a healthy 3.6%yoy
STOCK INFO
demand growth, mainly from the commercial (+7.3%yoy) and domestic
(+6.1%yoy) segments while the industrial segment recorded a marginal
KLCI
1.1%yoy contraction. Average tariffs remained largely flat.
Bursa / Bloomberg
Lag impact from higher coal price. A key reason for the stronger
than expected 1QFY17 was a circa 2-month lag in the impact of higher
spot coal price as Tenaga runs down cheaper inventories.
Coal cost
consumed in Sep/Oct/Nov 2016 was USD52 / USD57 / USD62 compared
to spot price which was already USD60/mt levels in Sep 2016. The
higher coal price will eventually filter into Tenaga’s earnings in the next
quarter on top of the impact of higher piped gas price form Jan 2017,
and as such, we retain our forecasts. On a positive note, spot coal price
has eased to around USD63-64/mt from the peak of USD88/mt seen in
November 2016. Our FY17F has already factored in an 8% contraction
to reflect the lag in passing on the additional fuel cost to consumers.
PPA savings is finite. While there is the possibility of Tenaga turning
into an under-recovery position given that the high coal price comes
together with a weak RM, the ICPT allows Tenaga to seek a review on
the current ICPT rebate (of 1.52sen/kWh), which is likely to turn into a
surcharge at current coal price and forex. However, if the Government
decides to utilise the remaining RM1.4b in PPA savings to buffer the
impact on tariffs, our forecasts could be trimmed slightly. Note however
that the PPA savings is a finite RM1.4b amount and if fuel prices
continue to remain elevated, tariffs will eventually be adjusted upwards,
1,680.89
5347/TNB MK
Board / Sector
Main
Syariah Compliant
Yes
Issued shares (mil)
5652.3
Par Value (RM)
1.00
Market cap. (RM’m)
78,454.40
Price over NA
1.44
52-wk price Range
RM12.7 - RM14.9
Beta (against KLCI)
1.05
3-mth Avg Daily Vol
12.3m
3-mth Avg Daily Value
RM173m
Major Shareholders (%)
Khazanah Nasional
28.21%
EPF
14.78%
Skim ASB
5.49%
regardless. If fuel price and forex stays at current levels, we estimate
Tenaga will turn into an under-recovery position of ~RM800m vs. the
RM1.4b PPA saving and an over-recovery of RM766m in the last review.
MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK
Kindly refer to the last page of this publication for important disclosures
MIDF RESEARCH
Wednesday, 25 January 2017
INVESTMENT STATISTICS
FYE Aug
Revenue (RM’m)
EBIT (RM'm)
Pre-tax Profit (RM’m)
Core net profit (RM'm)
FD EPS (sen)
EPS growth (%)
PER (x)
Net Dividend (sen)
Net Dividend Yield (%)
FY14
42,792.4
7,629.9
7,114.7
4,682.5
83.0
(13.7)
16.7
29.0
2.1
FY15
43,286.8
7,695.3
7,133.7
5,978.9
105.9
27.7
13.1
29.0
2.1
FY16
44,531.5
9,072.0
8,456.8
7,757.6
137.5
29.7
10.1
32.0
2.3
FY17F
47,891.8
8,636.9
8,043.2
7,152.5
126.7
(7.8)
11.0
57.0
4.1
FY18F
50,457.1
9,044.1
8,443.3
6,708.5
118.9
(6.2)
11.7
53.5
3.8
Source: Company, MIDFR
Recommendation. We re-affirm our BUY call on Tenaga at unchanged DCF-based TP to 16.80/share for now with
potential upside bias from this acquisition. We like Tenaga for: (1) Dividend catalyst on the back of FCF yield of ~7%
over FY17F/18F, a relatively under-geared balance sheet at 0.35x and Tenaga’s capital optimisation exercise (2)
Overseas expansion provides scope for stronger growth in the mid-term (3) Strong earnings visibility post-ICPT
implementation. Capital management, M&As and the resolution of its RM2b tax issue with the Inland Revenue Board
are key catalysts over the next 12 months.
EXHIBIT 1: TENAGA 1QFY17 RESULT SUMMARY
Financial Year End 31 August
(RMm, unless otherwise stated)
1QFY16
Revenue
10,676.8
EBITDA
3,738.1
Depreciation
(1,340.4)
EBIT
2,397.7
Net interest expense
(198.9)
Translation gain/(loss)
(58.5)
Associates/JVs
16.9
Pretax profit before forex translation
2,221.8
Tax
(201.1)
Minority Interest
(13.8)
Reported net profit
1,976.0
Core net profit
2,034.5
EPS (sen)
35.0
Core EPS (sen)
36.0
DPS (sen)
EBITDA margin
EBIT margin
Pretax margin (pre-forex transation)
Tax rate
Core net profit margin
4QFY16
11,236.7
3,601.7
(1,516.3)
2,085.4
(130.1)
(114.8)
24.6
1,987.1
(135.9)
(25.8)
1,762.2
1,877.0
31.2
33.3
1QFY17
11,241.6
3,793.5
(1,453.9)
2,339.6
(116.0)
(231.2)
(3.0)
2,226.4
(206.7)
48.0
1,740.5
1,971.7
30.8
34.9
YoY
5.3%
1.5%
8.5%
-2.4%
-41.7%
295.2%
-117.8%
0.2%
2.8%
-447.8%
-11.9%
-3.1%
-11.9%
-3.1%
QoQ
0.0%
5.3%
-4.1%
12.2%
-10.8%
101.4%
-112.2%
12.0%
52.1%
-286.0%
-1.2%
5.0%
-1.2%
5.0%
-
22.00
-
NA
NA
35.0%
22.5%
20.8%
-9.1%
19.1%
32.1%
18.6%
17.7%
-6.8%
16.7%
33.7%
20.8%
19.8%
-9.3%
17.5%
Source: Company, MIDFR
2
MIDF RESEARCH
Wednesday, 25 January 2017
Unit Revenue/Cost Analysis
Average tariff achieved for TNB sale
(sen/kwH)
1QFY16
4QFY16
1QFY17
YoY
QoQ
39.42
39.60
39.38
-0.1%
-0.6%
Volume (GWh)
Unit Revenue (RM/kwh)
26,846
0.3942
27,709
0.3960
27,811
0.3938
3.6%
-0.1%
0.4%
-0.6%
0.051
0.014
0.075
0.056
11.7%
-24.4%
0.014
0.024
0.016
15.4%
-30.4%
0.012
0.034
0.018
0.045
0.022
0.033
91.2%
-2.2%
25.7%
-26.0%
11,179.3
11,542.2
11,518.5
3.0%
-0.2%
10,583.0
1.0
433.6
161.7
10,972.6
1.5
449.3
118.8
10,952.7
13.5
448.4
103.9
3.5%
NA
3.4%
-35.7%
-0.2%
NA
-0.2%
-12.5%
Unit Cost (RM/kwH) - Total cost
Unit Cost (RM/kwH) - IPP & TNB Fuels
Unit Cost (RM/kwH) - Repair &
maintenance
Unit Cost (RM/kwH) - General expenses
Unit Cost (RM/kwH) - Staff cost
Gross Electricity Sale Revenue
(RMm):
TNB
EGAT
SESB
LPL
Source: Company, MIDFR
Generation Mix
Gas & LNG
Coal
Distillate
Oil
Hydro
Fuel Cost Composition
Gas & LNG
Coal
Distillate
Oil
1QFY16
(%)
4QFY16
(%)
1QFY17
(%)
46.5
49.3
0.0
0.1
4.1
44.1
52.2
0.1
0.5
3.5
42.2
54.4
0.1
0.4
3.0
1QFY16
(%)
4QFY16
(%)
1QFY17
(%)
57.6
42.0
0.1
0.3
57.2
41.0
0.6
1.1
52.1
46.8
0.3
0.8
Variance
(%)
YoY
(4.3)
5.1
0.1
0.3
(1.1)
Variance
(%)
YoY
(5.5)
4.8
0.2
0.5
Source: Company, MIDFR
3
MIDF RESEARCH
Wednesday, 25 January 2017
Cost Analysis (RMm)
IPP purchase cost
- Capacity payment
- Energy payment
Fuel costs
Repair & Maintenance
Staff cost
TNB General Expenses
Subs. COS & Opex
Depreciation & Amortisation
Total
1QFY16
2,991.4
4QFY16
3,376.8
1QFY17
3,280.3
YoY
9.7%
QoQ
-2.9%
975.9
2,015.5
1,416.6
1,960.2
1,114.8
2,165.5
14.2%
7.4%
-21.3%
10.5%
2,211.9
380.9
916.3
309.1
268.4
1,340.4
8,418.4
2,128.9
651.7
1,249.7
485.2
(54.0)
1,516.3
9,354.6
2,219.6
455.4
928.1
612.2
136.7
1,453.8
9,086.1
0.3%
19.6%
1.3%
98.1%
-49.1%
8.5%
7.9%
4.3%
-30.1%
-25.7%
26.2%
-353.1%
-4.1%
-2.9%
Source: Company, MIDFR
4
MIDF RESEARCH
Wednesday, 25 January 2017
Income Statement
FY14
FY15
FY16
FY17F
FY18F
Revenue
42,792.4
43,286.8
44,531.5
47,891.8
50,457.1
Operating expenses
(35,162.5)
(35,591.5)
(35,459.5)
(39,254.8)
(41,413.0)
EBIT
7,629.9
7,695.3
9,072.0
8,636.9
9,044.1
Net interest expense
(617.9)
(662.7)
(740.3)
(696.4)
(703.5)
102.7
101.1
93.3
102.7
102.7
PBT
7,114.7
7,133.7
8,456.8
8,043.2
8,443.3
Taxation
(687.9)
(1,072.8)
(746.0)
(844.5)
(1,688.7)
Associates
Minority Interest
(40.2)
(57.5)
(46.8)
46.2
46.2
Net profit
6,467.0
6,118.4
7,367.6
7,152.5
6,708.5
Core net profit
4,682.5
5,978.9
7,757.6
7,152.5
6,708.5
N/A
6,118
7,268
7,379
7,500
FY14
90,657.5
83,045.1
508.8
7,103.6
FY15
98,340.0
90,300.3
634.7
7,405.0
FY16
106,146.9
91,437.8
485.4
14,223.7
FY17F
101,741.3
93,089.0
485.4
8,166.9
FY18F
103,252.5
94,600.2
485.4
8,166.9
Current assets
Inventories
Receivables
Others
Cash & equivalent
TOTAL ASSETS
20,007.9
887.3
7,132.3
229.7
11,758.6
110,665.4
18,795.0
843.8
8,639.4
402.3
8,909.5
117,135.0
26,755.3
950.2
5,929.0
9,024.7
10,851.4
132,902.2
24,261.1
993.0
6,196.1
3,680.9
13,390.9
126,002.4
27,046.2
1,046.2
6,528.1
3,680.9
15,791.0
130,298.7
Share capital
Minority Interest
Reserves
TOTAL EQUITY
5,643.6
237.2
41,586.1
47,466.9
5,643.6
258.9
41,564.4
47,466.9
5,643.6
258.9
46,697.2
52,599.7
5,643.6
258.9
49,360.6
55,263.1
5,643.6
258.9
53,050.3
58,952.8
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Others
54,075.9
22,975.6
6,716.1
24,384.2
54,075.9
22,713.1
7,054.1
24,308.7
64,218.5
22,945.5
7,054.1
34,218.9
54,543.2
23,180.3
7,054.1
24,308.8
54,780.5
23,417.6
7,054.1
24,308.8
Current liabilities
Short-term borrowings
Payables
Others
15,592.2
2,480.4
7,973.5
5,138.3
15,592.2
1,985.8
10,411.5
3,194.9
16,084.0
1,985.8
6,010.3
8,087.9
16,196.0
1,985.8
6,342.3
7,867.9
16,565.4
1,985.8
6,711.7
7,867.9
69,668.1
69,668.1
80,302.5
70,739.2
71,345.9
Consensus net profit
Balance Sheet
Non-current assets
PPE
Investments in associate
Others
TOTAL LIABILITIES
5
MIDF RESEARCH
Wednesday, 25 January 2017
Cash Flow Statement
FY14
FY15
FY16
FY17F
FY18F
PBT
7,114.7
7,133.7
8,456.8
8,043.2
8,443.3
Depreciation & Amortization
4,872.5
5,294.2
5,110.4
5,209.3
5,349.3
Operating activities
Chgs in working capital
3,901.6
(164.5)
22.1
(15.7)
Interest expense
(617.9)
(662.7)
(740.3)
(696.4)
(703.5)
Tax paid
(690.0)
(810.8)
(746.0)
(844.5)
(1,688.7)
Others
(241.4)
(3,416.6)
1,376.1
650.2
657.3
10,437.9
11,439.4
13,292.5
12,383.8
12,042.1
(10,006.5)
(10,363.7)
(11,142.8)
(7,000.0)
(7,000.0)
(3,197.7)
(13,204.2)
(2,462.6)
(12,826.3)
(7,253.1)
(18,395.9)
139.5
(6,860.5)
139.5
(6,860.5)
Financing activities
Dividends paid
Net proceeds in borrowings
Others
CF from Financing
(1,410.9)
3,144.2
(423.9)
1,309.4
(1,636.7)
(1,775.2)
(839.8)
(4,251.7)
(1,636.7)
9,063.4
(833.3)
6,593.4
(3,218.6)
234.9
(2,983.8)
(3,018.8)
237.3
(2,781.5)
Net changes in cash
Beginning cash
Overdrafts, Deposits & Forex
Ending cash
(1,456.9)
9,328.8
(0.4)
7,871.5
(5,638.6)
7,871.5
0.2
2,233.1
1,490.0
2,233.1
3,723.1
2,539.6
3,723.1
6,262.7
2,400.0
6,262.7
1.0
8,663.7
FY14
FY15
FY16
FY17F
FY18F
15.2%
-0.2%
-13.7%
29.2%
10.9%
9.9%
4.2%
28.9%
8.41
1.7
6.5
0.5
1.2%
3.9%
27.7%
30.0%
13.8%
12.6%
5.1%
33.3%
8.41
1.7
7.5
1.4
2.9%
9.2%
29.7%
29.7%
17.4%
14.7%
5.8%
26.8%
9.32
1.5
6.8
2.7
7.5%
-2.4%
-7.8%
28.9%
14.9%
12.9%
5.7%
21.3%
9.79
1.4
6.5
6.8
5.4%
4.0%
-6.2%
28.5%
13.3%
11.4%
5.1%
16.3%
10.45
1.3
6.1
6.4
CF from Operations
Investing activities
Capex
Others
CF from Investments
Ratios
Revenue growth
EBITDA growth
Net profit growth
EBITDA margin
PATAMI margin
ROE
ROA
Net gearing
Book value/share (RM)
PBV (x)
EV/EBITDA (x)
FCF yield (%)
6
MIDF RESEARCH
Wednesday, 25 January 2017
DAILY PRICE CHART
Hafriz Hezry
[email protected]
03-2173 8392
Source: Bloomberg, MIDFR
7
MIDF RESEARCH
Wednesday, 25 January 2017
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for
distribution only under such circumstances as may be permitted by applicable law.
Readers should be fully aware that this report is for information purposes only. The opinions contained
in this report are based on information obtained or derived from sources that we believe are reliable.
MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or
implied, as to the accuracy, completeness or reliability of the information contained therein and it should
not be relied upon as such.
This report is not, and should not be construed as, an offer to buy or sell any securities or other
financial instruments. The analysis contained herein is based on numerous assumptions. Different
assumptions could result in materially different results. All opinions and estimates are subject to change
without notice. The research analysts will initiate, update and cease coverage solely at the discretion of
MIDF AMANAH INVESTMENT BANK BERHAD.
The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have
interest in any of the securities mentioned and may benefit from the information herein. Members of the
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whose securities are mentioned herein This document may not be reproduced, distributed or published
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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Total return is expected to be <-15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
8