Company Coverage
Tenaga Nasional (TNB MK): Absorbs RM120m-150m Subsidy For Additional Domestic Users
HOLD (Downgraded)
Current price:
Target price:
Upside:
Previous TP :
RM13.04
RM14.60
+12.3%
RM16.30
Analyst
Highlights
- Contrary to our expectation, Tenaga announced that the group will absorb the RM120m-150m impact from the electricity tariff fuel surcharge exemption for the period Sep-Dec 26.
- Albeit a minimal 2% earnings impact, the decision above is now an overhang on Tenaga’s near-term share price performance – given rising regulatory interference and we are unsure if this will be a one-off.
- Downgrade Tenaga to HOLD with a lowered DCF-fair value of RM14.60. In arriving at our fair value, we have prudently raised our discount rate from 7.8% to 8.2% (incorporating a 100bp increase in risk premium for the stock).
Analysis
- Tenaga shares government’s burden; absorbs subsidy. Contrary to our expectation, Tenaga Nasional (Tenaga) announced last Friday that the group will absorb the RM120m-150m impact from the electricity tariff fuel surcharge exemption for the period Sep-Dec 26. To recap, the RM120m-150m arose as a result of the government expanding electricity bill protection for domestic users from 600kWh to 800kWh.
- Negative for Tenaga. Earnings impact is 2% to 2026’s forecast. However, the decision above implies that the Automatic Fuel Adjustment (AFA) mechanism may be subject to government intervention in the near future and we expect investors to gradually discount the sanctity of the Incentive Based Regulation (IBR) and cost pass-through framework.
- Downgrade Tenaga to HOLD, overhang to persist into the near future. As we cannot say with certainty that this is a one-off (there is now an overhang that Tenaga may be asked to absorb the subsidy if Jan-Mar 27 electricity usage remains high), we downgrade Tenaga from BUY to HOLD with a lower DCF-based target price of RM14.60. In arriving at our fair value, we have prudently raised our discount rate from 7.8% to 8.2% (incorporating a 100bp increase in risk premium for the stock).
Highlights
- Contrary to our expectation, Tenaga announced that the group will absorb the RM120m-150m impact from the electricity tariff fuel surcharge exemption for the period Sep-Dec 26.
- Albeit a minimal 2% earnings impact, the decision above is now an overhang on Tenaga’s near-term share price performance – given rising regulatory interference and we are unsure if this will be a one-off.
- Downgrade Tenaga to HOLD with a lowered DCF-fair value of RM14.60. In arriving at our fair value, we have prudently raised our discount rate from 7.8% to 8.2% (incorporating a 100bp increase in risk premium for the stock).
Analysis
- Tenaga shares government’s burden; absorbs subsidy. Contrary to our expectation, Tenaga Nasional (Tenaga) announced last Friday that the group will absorb the RM120m-150m impact from the electricity tariff fuel surcharge exemption for the period Sep-Dec 26. To recap, the RM120m-150m arose as a result of the government expanding electricity bill protection for domestic users from 600kWh to 800kWh.
- Negative for Tenaga. Earnings impact is 2% to 2026’s forecast. However, the decision above implies that the Automatic Fuel Adjustment (AFA) mechanism may be subject to government intervention in the near future and we expect investors to gradually discount the sanctity of the Incentive Based Regulation (IBR) and cost pass-through framework.
- Downgrade Tenaga to HOLD, overhang to persist into the near future. As we cannot say with certainty that this is a one-off (there is now an overhang that Tenaga may be asked to absorb the subsidy if Jan-Mar 27 electricity usage remains high), we downgrade Tenaga from BUY to HOLD with a lower DCF-based target price of RM14.60. In arriving at our fair value, we have prudently raised our discount rate from 7.8% to 8.2% (incorporating a 100bp increase in risk premium for the stock).
HOLD (Downgraded)
Current price:
Target price:
Upside:
Previous TP :
RM13.04
RM14.60
+12.3%
RM16.30
Analyst
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