LOWER PROFIT EXPECTED FOR TNB IN Q4 2022, ICPT SURCHARGE MAY INCREASE

KUALA LUMPUR, Nov 24 (Bernama) -- Tenaga Nasional Bhd (TNB) is expected to record lower profits in the fourth quarter of 2022 (Q4 2022) following the rising operating expenses in Q3 2022, said Hong Leong Investment Bank (HLIB).

Nonetheless, it said the upcoming Imbalance Cost Pass-Through (ICPT) review would be able to address the current mismatch of ICPT recognition and recovery, given the stable global coal prices in recent months. 

In a research note, HLIB noted that the government is providing a guarantee to TNB’s financing of up to RM6 billion to fund the additional working capital costs, which are also recoverable through ICPT.

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"We maintain 'buy' on TNB with an unchanged Discounted Cash Flow to Equity (DCFE)-derived target price (TP) of RM11.65, as the utility co-leverages on the economic recovery in 2022. 

"The company is also backed by stable earnings under Regulatory Period 3 (RP3), with a committed dividend payout policy," said HLIB.

Meanwhile, CGS-CIMB noted that the government has paid RM4.8 billion out of the approved RM5.8 billion ICPT for the period of Jan 1-June 30, 2022, adding that the payment will ease TNB’s receivables concerns.

“Coal prices were higher at US$209.7 per tonne average in the nine months of 2022 versus the benchmark coal price of US$79 per tonne under RP3.

“Hence we expect a higher ICPT surcharge for the upcoming implementation period of Jan 1-June 30, 2023,” the research firm said in a note today. 

CGS-CIMB also reiterated its 'add' call on TNB with a higher TP of RM13.60 from RM13.30 previously. 

“We like TNB as it would likely keep its monopoly position in the electricity transmission and distribution segment and has decent dividend yields of over five per cent for financial year 2022-24,” it said.

It added that TNB also is poised to benefit from Malaysia’s energy transition, namely, additional grid investments and renewable energy opportunities, which could boost its earnings and improve the public’s environmental, social and corporate governance perception of TNB.

-- BERNAMA