KUALA LUMPUR: HLIB Research has given Tenaga Nasional Bhd a buy call with a target price of RM17 on news that TNB is getting RM1.3 billion in compensation from the government in order to cover its higher energy fuel costs under the Imbalance Cost Past Through mechanism.
In its newsbreak report today, the research house said the government will fund the RM1.3 billion by utilising the PPA Saving Fund, which is the accumulated savings from the Renegotiation of Power Purchase Agreements with the First Generation Independent Power Producers.
"At current juncture, coal price and ringgit have both been relatively stable, relieving concerns on further increase in coal fuel costs. However, gas price is expected to be hiked further by RM1.50/mmbtu for every 6 months until market price of RM26/mmbtu is matched," HLIB Research wrote.
The report did point out risk areas to look out for, like disruption in energy fuel supply and unscheduled power plant shutdown, among others.
However, the firm concluded that it remained positive on TNB’s long term growth and strong cash flow.
"Shareholders stand to receive higher dividend yields of up to 5 per cent (vs. historical 2-3 per cent) based on the updated dividend payout policy (30-50 per cent of net income)," the firm added.