Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: KENANGA



Kenanga Research is maintaining a "buy" call on Tenaga Nasional Bhd (TNB) with a fair value of RM10.47 based on a higher strong earnings forecast for financial year 2011.

The research company, in a statement today, said it maintained its forecast on TNB's net profit for the 2010 and 2011 financial years between RM3.46 billion and RM3.18 billion, respectively.

"However we do not expect overly significant contributions given the small stake," it said.

Kenanga said a potential tariff hike in Jan 2010 and an influx of foreign funds could lift TNB to a price earnings ratio (PER) of 15 times from its current FY10 and FY11 core PER of 13.5 times and 12.8 times.

It, however, maintained that any sharp re-rating would be short-lived unless a formalised formula for tariff was in place.

The research company said that it was pleased the utility company was actively using its excess funds to tap into new revenue streams.

"TNB can enjoy better returns given translation gains arising from the stronger Ringgit if the consortium takes out US dollar denominated debts.

The research note also said that TNB was currently discussing with an Egyptian conglomerate to set up a gas-fired power plant and hoped to complete negotiations before year-end. -- Bernama