- We maintain our BUY on Tenaga Nasional Bhd with an unchanged DCF-derived fair value of RM17.00/share, which implies an FY15F PE of 15x and P/BV of 2.0x.

- Tenaga yesterday announced that it has received valid acceptances of 90.21% of Integrax shares, placing it on track to compulsorily acquire the remaining shares it does not own in the port operator.

- The group had earlier stated that it does not intend to maintain the listing status of Integrax. Trading on the latter will be suspended on 21 April 2015.

- To recap, Tenaga had on 9 Jan 2015 made a conditional takeover offer to acquire all the remaining shares it does not own in Integrax for RM2.75/share. Tenaga had then owned a 22.12% stake in Integrax, which it purchased at a PE of 10x in March 2011.

- Following a disagreement by Integrax’s other major shareholders – namely Amin Halim Rasip (21.37%) and Perak Corp (15.74%) on its earlier offer price – Tenaga had raised its price for the GO to RM3.25/share.

- According to Tenaga’s nominee director in Integrax and also Tenaga’s CFO, Fazlur Rahman, Integrax’s operations post-privatisation would remain largely unchanged in view of its mainly supporting role to Tenaga’s Janamanjung coalfired power plants.

- He added that further details of Tenaga’s plan for Integrax will be announced after 13 April, which is the revised deadline for acceptance. Pending this development, we are maintaining our FY15F-FY17F earnings estimates.

- Meanwhile, it was also reported that Tenaga has also received its shareholders’ approval for its third Jetty Teminal Usage Agreement with Integrax (JTUA 3) for the import handling of coal for Tenaga’s 1,000MW Janamanjung Unit 5. This approval is not a surprise. This plant is scheduled to commence operations on 1 October 2017.

Source: AmeSecurities Research - 9 Apr 2015