HLIB MAINTAINS 'BUY' ON TNB, BACKED BY ECONOMIC RECOVERY, DIVIDEND POLICY

KUALA LUMPUR, Feb 28 (Bernama) -- Hong Leong Investment Bank Bhd (HLIB) maintained its 'Buy' call on Tenaga Nasional Bhd (TNB) with an unchanged target price of RM11.65, as the national utility company leverages on the economic recovery in 2023.

TNB is backed by stable earnings under the Regulatory Period 3 (RP3), with a committed dividend payout policy, the investment bank said.

HLIB said that power demand growth remains healthy at 6.0 per cent year-on-year (y-o-y) for Peninsular Malaysia in the financial year 2022 (FY2022) mainly due to low base and is expected to leverage onto the country’s continued economic recovery in 2023.

“We expect Malaysia to achieve 4.0 per cent gross domestic product growth for the year, and under the RP3 framework (2022-2024), the assumed demand growth was 1.7 per cent y-o-y per annum,” it said in a research note today.

It said the management remains confident of earnings sustainability under RP3 framework while focusing to expand non-regulated earnings base, such as power generation, renewable energy and retail business segments.

On TNB’s cash flow, HLIB said the company's receivables had further ballooned slightly to RM23.1 billion in the fourth quarter (4Q) of FY2022 versus RM22.3 billion in 3Q FY2022, due to timing mismatch of imbalance cost pass-through (ICPT) recognition and recovery.

“We expect the amount to drop in the coming quarters following the higher approved ICPT amount (RM16.2 billion) for the first half (1H) of FY2023 and the current downtrend of global coal prices in recent months.

“The government has already paid RM4 billion in January out of RM10.4 billion subsidies and the remaining portion will be paid in five equal instalments. The management is also guiding for ICPT of RM12.0 billion for 2H FY2023 based on current fuel price trend,” it added.

-- BERNAMA