THE BUZZ
In a Bursa announcement, Tenaga Nasional (TNB) announcedthat its Chief Financial Officer (CFO), Mohamed Rafique Merican bin Mohd Wahiduddin Merican, 47, has resigned topursue better opportunities and career advancement.
OUR TAKE
A surprise. Thispiece of news took us by surprise as we had not heard any rumours of En Rafiqueleaving. Meanwhile, a corporate day being organized by TNB for investors in Maycould be affected by this development. Appears to be an amicable parting of ways.As far as we understand, there are no negative developments surrounding EnRafique's departure. We also understand that management has already begun the search for a replacement. During En Rafique's tenure, TNBcontinued to pare down its debts despite facing numerous headwinds. At thisjuncture, we believe that there will beminimal disruption to TNB's activities given that all standard operating procedures should be in place at this long established GovernmentLinked Company (GLC).
Coal tax conundrum. Sentiment in the company has been slightly doused of late in view of recent rumours thatIndonesia may be slapping a 25% export tax on coal, which stoked fears of aprice hike in coal. While we do see some rationale for an export tax on miningores, we see no justification for a coal export tax as there is limitedcapacity for local upgrading ofcoal or value adding in Indonesia priorto export. We believe that variousparties, including miners and importers, will lobby hard to have this taxreduced or postponed. For now, we maintain our coal cost assumption of USD110per tonne for FY12 and FY13.
Maintain BUY.While some parties may choose to read more than is justified inthe resignation of the CFO, particularly given the upcoming departure of CEO Datuk Seri CheKhalib - who has chosen not to renew hiscontract when it expires in June, we believe that a leading GLC like TNB will keep itsoperations intact. As such, any short term share price weakness should be viewedas an opportunity to accumulate the shares. We maintain our earnings forecastand call, pending further clarification from TNB's upcoming results briefing on 12 April.