Tenaga Nasional

[winston]

not vested

A decent start

Upgrade to BUY 1Q25 results were in line, as TNB unsurprisingly recorded a shortfall in regulated revenue (to be recovered from the Industry Fund) from lower realised tariff (and demand softness).

We raise FY26E-27E earnings to reflect MYR10bn of contingent capex in RP4.

Upgrade to BUY (from HOLD) with a higher DCF-based TP of MYR15.50 (+7%).

The eventual finalisation of the recovery mechanism is a potential re-rating catalyst in our view.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/461150.pdf

[winston]

not vested

Rising power demand to bolster TNB’s earnings

Expect stronger earnings in the second half of this year (2H25) as it finalises a recovery mechanism for contingent capital expenditure (capex).

The higher Regulated Asset Base under Regulatory Period 4 (RP4), provides an earnings step up between this year and 2027, the period covered by RP4.

CIMB Research said TNB trades at a reasonable enterprise value to earnings before interest tax depreciation and amortisation of 7.4 times for this year and offers decent dividend yields of 3.5% to 3.9%.

The key downside risks cited are higher-than-expected operating costs, unscheduled power station outages, and lower-than-expected spending on RP4 contingent capex.

TNB’s targeted capex for this year is about RM20bil, consisting of regulated base capex of RM10bil, RM2bil contingent capex and non-regulated capex of RM8bil.

Source: The Star

https://www.thestar.com.my/business/bus ... s-earnings

[winston]

not vested

An unexpected tax twist

Overhang to persist

The Federal Court decision for Tenaga’s 2018 tax dispute bodes negatively for Tenaga’s remaining cases, thus extending an already longstanding overhang.

Nevertheless, potential provisioning could be deemed as one-off, while the overall dispute amount is manageable relative to Tenaga’s cash reserves (thus posing a low risk to dividends).

Tenaga’s operational earnings remain resilient with potential upside risk from contingent capex deployment.

Maintain BUY with a MYR15.50 TP (DCF-based).

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/468037.pdf

[winston]

vested

Tenaga share price falls after latest court loss over tax dispute, analysts flag looming hefty provisions

By Syafiqah Salim

Tenaga could face a significant one-off tax provision of up to RM6.8 billion in the second quarter ended June 30, 2025 (2QFY2025).

In the worst-case scenario where Tenaga must pay the full amount, the impact on CIMB’s discounted cash flow-based target price of RM15.75 would be 87 sen per share, or 5.5%, though core earnings may remain intact if ITA claims succeed.

In terms of headline net profit, CIMB noted that such a scenario would more than wipe out its current FY2025 forecast of RM3.78 billion, but is unlikely to significantly affect core net profit, as the tax charge is considered a one-off.

Source: theedgemalaysia.com

https://theedgemalaysia.com/node/761206

[winston]

vested

Chance to gather TNB shares on price slide

Analysts warned that the ruling could force TNB to make substantial provisions in upcoming financial results and may also have implications for the group’s other ongoing legal challenges.

The cumulative amount from notices of additional assessment for years 2013 to 2021 is RM5.05bil (inclusive of the RM1.25bil for 2018).

The worst-case scenario where TNB has to pay the full amount, the impact to its current target price (TP) of RM15.75 would be 87 sen per share or 5.5%.

In terms of impact on headline net profit, the worst-case scenario would more than wipe out our current FY25 forecast of RM3.78bil but is unlikely to significantly affect our FY25 core net profit forecast as we consider it a one-off tax charge.

TA Research said while the RM1.25bil tax claim could lead to a one-off 27% hit to TNB’s FY25 earnings and a 2% reduction in net assets, it would not change the firm’s long-term view, which remained positive on the group’s growing regulated asset base, driven by higher grid investments to support the energy transition.

The research house said the new automatic fuel adjustment framework would support TNB’s strong cash flow and could lead to higher dividend payouts in the future.

Source: The Star

https://www.thestar.com.my/business/bus ... rice-slide

[winston]

Tax claim setback, appears procedural

After earlier court wins, Tenaga faced a setback yesterday as the Federal Court ruled in favour of the IRB on a 2018 tax assessment.

While a provision may be required near term, we see room for recovery as Tenaga plans to resubmit under the correct schedule affirmed by the court.

Maintain our Add rating with a DCF-based TP of RM19.10 (WACC: 7.6%).

Source: CGS

https://rfs.cgsi.com/api/download?file= ... E0B0E8F952