KUALA LUMPUR: Kenanga Research believes Tenaga Nasional Bhd
's 2Q18 results are on track to meet forecasts while 1H18 core profiut of RM3.25bil was within expectations.
The research house said the core earnings were adjusted for RM564.7mil reinvestment allowance, RM80.6mil forex translation loss and RM206.5mil impairment for its 30%-owned Turkish associate Gama on forex losses.
2Q was a sequentially weaker quarter for Tenaga due to higher opex by 9% to M10.68bil as total fuel costs grew 8% to RM6.63mil while non-fuel costs rose 12% to RM4.06bil.
However, Kenanga believes the high fuel costs is not a matter of concern as it is transferable under the ICPT framework to end user.
"As such, we are not worried with the sequential weaker earnings which were largely affected by higher fuel costs as it will be matched in future by ICPT under-recovery at its top-line level," said Kenanga.
It said total fuel costs are expected remain high until at least end-2019 as Tenaga will be required to use more less-cost-effective non-coal fuels.
"Meanwhile, the fund available for Kumpulan Wang Industri Elektrik is RM760m currently which we believe should be enough to offset the domestic subsidy in 2019 as the subsidy for 2H18 is c.RM100m," it said.
Kenanga maintained outperform on Tenaga with a target price of RM17.90.
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