As Tenaga adopts a new financial year ending December, there was no comparable quarters. Nevertheless, we have illustrated in the earnings table summary below, the most comparable quarter to 2Q18/1H18 for some sense to its performance.
2Q18 core earnings performance was unflattering as core earnings fell 12.5% qoq to RM1.74bn. We believe this was attributed to the timing of its repair & maintenance costs, which was unusually low in 1Q18, and higher fuel costs apportioned to Tenaga in RP2. Our 2Q18 core earnings were adjusted for RM2605.5m of asset impairment made for its 30%-owned Turkish associate, Gama Enerji, forex translation losses worth RM169.6m and other one-offs for inventories and receivables.
2Q18 core profit drove 1H18 core earnings to RM3.73bn. Comparing to similar period in FY17 (Dec-May 2017), core earnings fell 6% amidst higher input costs from fuel as apportioned to Tenaga in RP2. Against ours and consensus estimates, Tenaga’s 1H18 core earnings were inline at 50% and 52% respectively.
2Q18 under-recovery stood at RM245.2m, bringing total 1H18 under recovery to RM879.3m. This implies that the surcharge imposed in 2H 2018, worth RM698.2m, is short by RM181.1m. The under-recovery in 2Q18 due to the lower average coal price consumed which was at US$91.1/MT (RM361.4/MT, 1Q18: RM361.7/MT @ US$92.1/MT).
Tenaga’s share price has rebounded strongly after announcement of the tariff surcharge in 2H2018. Clearly, the latter had removed doubts over the ICPT mechanism being honoured by the new government. Still, we note that returns for Tenaga are expected to be lower in RP2 albeit this is balanced off with its new dividend policy, adopted in 2H 2017. This has led to higher dividend payouts and shored up support towards the stock. Accumulate on dips.
Source: BIMB Securities Research - 3 Sept 2018
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TENAGACreated by kltrader | Aug 12, 2024
Created by kltrader | Aug 12, 2024
Created by kltrader | Aug 09, 2024
Created by kltrader | Aug 09, 2024