TENAGA Nasional Bhd (TNB) is now a value stock that investors may want to pick up following a recent selldown that saw some RM4 billion of its market capitalisation wiped out.
"We find that there is still significant upside to our fair value (of RM10.10) on TNB, which we see as a value stock at the current price level," OSK Research's acting research head Chris Eng said in a note to clients yesterday.
He maintained a "buy" recommendation on TNB and raised his profit forecast.
Merrill Lynch on Tuesday upgraded the stock to a "buy" with a target price of RM8.10.
TNB's share price had been bashed down of late amid volatile markets, losing 21 per cent this month to a year-low of RM6.25 last week.
Yesterday, it closed at RM6.95, five sen more than the previous day.
Sentiment towards TNB turned negative after the government announced that its power purchase agreement talks with independent power producers (IPPs) were suspended.
This meant that TNB will have to continue with its high capacity payments to IPPs, dealing a blow to its 2009 profits given high fuel costs.
Aside from that, investors also worried that it would not be granted a much-needed tariff increase in 2009.
Eng, however, believes that even if the tariff increase doesn't materialise, TNB's fair value would be worth RM8.35 a share, which still justifies a "buy" call.
He nevertheless hopes a tariff increase may happen in mid-2009.
Meanwhile, OSK, factoring in a higher demand growth for electricity and higher ringgit cost of coal, raised its net profit forecast for TNB by three per cent this year to RM2.8 billion and by six per cent for the following year to RM1.4 billion.
Although TNB's 2009 profits will be poor and a weaker ringgit will result in foreign exchange losses - almost half of its loans are in non-ringgit currencies - TNB still remains a value buy at current levels as the selling has been overdone, he said.
It's net profit for the last fiscal year ended August 2007 stood at RM3.6 billion.
Source
"We find that there is still significant upside to our fair value (of RM10.10) on TNB, which we see as a value stock at the current price level," OSK Research's acting research head Chris Eng said in a note to clients yesterday.
He maintained a "buy" recommendation on TNB and raised his profit forecast.
Merrill Lynch on Tuesday upgraded the stock to a "buy" with a target price of RM8.10.
TNB's share price had been bashed down of late amid volatile markets, losing 21 per cent this month to a year-low of RM6.25 last week.
Yesterday, it closed at RM6.95, five sen more than the previous day.
Sentiment towards TNB turned negative after the government announced that its power purchase agreement talks with independent power producers (IPPs) were suspended.
This meant that TNB will have to continue with its high capacity payments to IPPs, dealing a blow to its 2009 profits given high fuel costs.
Aside from that, investors also worried that it would not be granted a much-needed tariff increase in 2009.
Eng, however, believes that even if the tariff increase doesn't materialise, TNB's fair value would be worth RM8.35 a share, which still justifies a "buy" call.
He nevertheless hopes a tariff increase may happen in mid-2009.
Meanwhile, OSK, factoring in a higher demand growth for electricity and higher ringgit cost of coal, raised its net profit forecast for TNB by three per cent this year to RM2.8 billion and by six per cent for the following year to RM1.4 billion.
Although TNB's 2009 profits will be poor and a weaker ringgit will result in foreign exchange losses - almost half of its loans are in non-ringgit currencies - TNB still remains a value buy at current levels as the selling has been overdone, he said.
It's net profit for the last fiscal year ended August 2007 stood at RM3.6 billion.
Source
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