Tenaga Nasional; Hold; RM8.62
Price Target: RM7.45; TNB MK

Tenaga Nasional Berhad (TNB) announced that it has received a letter from Suruhanjaya Tenaga (ST) confirming that TNB has been selected as the preferred bidder in the most recent ‘Fast Track Project 3A’ International Competitive Bidding to develop a 1 x 1000 MW Coal-Fired Power Plant at Manjung, Perak. The Letter of Award will be issued upon successful completion of the negotiations. The plant will take 45 months to build with expected commencement in Oct17.

The winning of bid by TNB came in within expectation as it has been shortlisted earlier as one of the lowest bidder for the plant. We estimate the project will cost c.RM4b and it is likely to be mostly debt funded with estimated debt:equity ratio of 80:20. We expect the equity portion of the project to be funded by internal cashflow and the group’s net gearing to remain adequate at 0.4x after the new investment. Maintain Hold for TNB for its reasonable valuations and potential upside from sector reform. Our TP is under review pending announcement of its 3Q12 result tomorrow evening.

Source: HwangDBS Research - 17 Jul 2013