TNB likely to give higher dividend


TNB Tenaga building

PETALING JAYA: Utility giant Tenaga Nasional Bhd (TNB), whose recent dividend payout has surpassed forecast, may have higher dividend payout in store for investors, according to CGS-CIMB Research.

The research firm revised TNB’s dividend payout estimate upwards for the financial years of 2019 to 2021 (FY21-21) to 55%, as compared to 50% previously.

This was following TNB’s decision to announce an interim dividend of 30 sen in the second quarter of FY19, representing a dividend payout of 55% based on the adjusted earnings for one-off items.

Earlier, CGS-CIMB Research expected a 50% dividend payout for the three-month period.

“Dividend yield remains decent at 4% for FY19-21, ” it said in a note yesterday.

The research firm also revised TNB’s FY19-21 core net profit estimates upwards marginally by 0.1%-0.4% to factor in the improving contribution from the utility giant’s associates.

“We still like TNB as the regulatory risk from sector reforms seems to be low, as it will likely maintain its monopoly in the transmission & distribution (T&D) segment and it is one of the cheapest big cap counters, with a decent dividend yield of about 4% for FY19-21, ” added CGS-CIMB Research.

Meanwhile, in a separate note, TA Securities Research said that TNB’s core net profit of RM3.08bil in the first half of FY19 was within its expectations and consensus, accounting for 55% of full-year forecasts respectively.

For context, the core net profit in the six-month period fell by almost 19% year-on-year from RM3.8bil.

Commenting on regulatory headwinds faced by TNB, TA Securities Research said that the impact will remain benign at this juncture.

“(TNB’s) monopoly of crown jewel T&D assets will likely remain intact.

“For the generation business, we believe that TNB shall retain its market superiority versus new players in the event that this segment is liberalised. This is given TNB’s entrenched market leadership (current market share: 56%), solid track record, and strong balance sheet, ” it said.

However, in the worst-case scenario of retail market liberalisation, the impact to TNB’s net profit could amount to about 0.5% during the Regulatory Period 2 (2018-20), or average net operating profit after tax of RM21mil per annum.

“This is assuming the black skies scenario whereby TNB loses 100% revenue from customer service (segment), ” stated the research house.


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