• Maintain BUY (▲TP: RM17.84). Tenaga 6MFY24 PATAMI of RM2.16bn was above our estimate, however inline with consensus at 60% and 55% respectively. In 2QFY24, earnings jumped >100% YoY attributed to higher sales of electricity (+3.8% QoQ, +6.3% YoY), lower fuel cost and lower forex translation loss amid strengthening of MYR. An interim single-tier dividend of 25 sen/share is proposed (vs 18sen/share in 2Q23). We revamp earnings for FY24F/FY25F/FY26F by 23%/12%/1% to RM4.4bn/RM4.7bn/RM5.1bn as we revised higher associates/JV contribution and revisit our fuel cost assumption. Maintain a BUY call on Tenaga with higher TP of RM17.84 based on FY25F EPS of 82 sen pegged to PER of 21.8x, a 33% premium to 2 years historical mean. We think this is fair premised on reforms of the power sector market onwards.

• Key highlights. 2QFY24 recorded a smaller (vs 2QFY23) negative fuel margin of RM44mn, as fuel cost to generate electricity is higher than revenue earnt amid stable coal prices. Its share of results of associates on the other hand, outperformed (QoQ & YoY: +>100%) thanks to the recent 276MW solar portfolio acquisition in Ireland and higher generation from wind assets.

• Earnings Revision. We revamp earnings for FY24F/FY25F/FY26F by 23%/12%/1% to RM4.4bn/RM4.7bn/RM5.1bn as we revised higher associates/JV contribution and revisit our fuel cost assumption.

• Outlook. We foresee Tenaga’s earnings to remain robust in coming quarters with stable coal prices and stronger electricity demand. For Malaysia, energy demand is expected to grow 35%, or 7GW between now until 2030, propelled by the energy-guzzling Data Centres (DCs) projects. The kickstart of Corporate RE Supply Scheme (CRESS) by next month with no quota limit will definitely benefit Tenaga.

Source: BIMB Securities Research - 30 Aug 2024