Investment Highlights

• We maintain BUY on Tenaga Nasional (TNB) with an unchanged DCF-based fair value of RM11.80/share (WACC:  7%, terminal growth rate: 2%). We ascribe a 3-star ESG  rating to TNB. 

• Here Are the Key Takeaways From TNB’s Analyst Briefing  Yesterday: -

  • Data centres are expected to underpin TNB’s long-term growth. Energy demand from data centres is stable and recurring. There are 34 data centres coming up in  Peninsular Malaysia and TNB is expected to be the main supplier of electricity to all of them. Potential demand is estimated to be 4,300MW in total.
     
  • To-date, TNB has secured data centre investments with a potential demand of 760MW in total. One of these included an electricity supply agreement to fulfil the energy requirements of GDS’ data centre at Nusajaya  Tech Park in Johor Bahru.
     
  • GDS Data Centre is expected to commence operations with an initial supply of 16MW in mid-2023E. TNB plans to deliver the maximum demand requirement of 85.5MW  by the end of FY23E. 
     
  • TNB’s GSparx (solar rooftop unit) is envisaged to perform well this year with potential wins of 145MW  worth of solar contracts. GSparx’s revenue is estimated to be RM70mil in FY23F. To date, GSparx has secured  1,926 projects with a total capacity of 272MW. 
     
  • Notable contracts that GSparx has won include a  collaboration with AEON to install rooftop solar systems on 40 AEON and AEON Big shopping malls in Malaysia. 
     
  • In FY23F, GSparx will install solar facilities at 11 AEON  malls. All the 40 shopping centres will be installed with solar systems by the end of FY24F. 
     
• TNB is currently trading at a FY24F PE of 12x, which is lower than the 2-year average of 15x. Dividend yield is also decent at 5% for FY24F.  

Source: AmInvest Research - 31 May 2023