BUSINESS

MIDF REMAINS NEUTRAL ON TNB ON EXPECTED CONSTRAINED CASH FLOW

19/09/2022 11:36 AM

KUALA LUMPUR, Sept 19 (Bernama) -- MIDF Research has maintained its “neutral” call on Tenaga Nasional Bhd (TNB) as it expects the utility provider’s cash flow to likely remain constrained.

It also maintained TNB’s target price at RM8.45.

“Cash flow constraints from deep cost under-recovery might depress dividend payout to the lower end of TNB’s 30 per cent to 60 per cent payout policy.

“We believe it reduces the attractiveness of the stock in the near term amid rising interest rates,” it said in a research note.

TNB revealed that it had received RM1.9 billion in imbalance cost pass-through (ICPT) cost recovery from the total RM5.8 billion the government has committed to subsidise.

“This is in line with indications at TNB’s recent analyst briefing, which is for collection of the RM5.8 billion in ICPT subsidy from the government by year-end,” it said.

The research house also said it is in favour of TNB’s long-term decarbonisation initiatives.

Still, it expects “near-to-mid-term transition pain to endure” from such initiatives, such as earnings impact from early coal plant retirement and stake dilution from carbon capture, utilisation and storage, and incorporation cost impact from the potential introduction of carbon pricing introduction.

At 11.05 am, TNB shares erased seven sen to RM8.69, with 971,400 shares changing hands.

-- BERNAMA


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