UOB Kay Hian Research retains Buy on Tenaga, TP RM13.70


“Key rerating catalysts for the stock include: a) active capital management; b) a fair outcome from RP3; and c) operational savings from Tenaga’s reorganisation exercise, ” it said.

KUALA LUMPUR: UOB Kay Hian Malaysia Research is maintaining its Buy call on Tenaga Nasional with a target price of RM13.70 on news the power giant is mulling plans to list its power generation unit.

The research house said on Tuesday Bloomberg reported the listing on Bursa was slated to be next year.

There is supposed to be an issuance of shares based on the value of holding in Tenaga. This follows the reorganisation exercise that is slated to be completed by 1H21.

“This is seen as a monetisation exercise, and we deem the newsflow positive to share price.

“In the past, Tenaga did not release details of its plans for separate listing of its businesses, but the investing community have cited unlocking of assets as a key rerating catalyst for the stock in the absence of growth (of Tenaga's regulated assets), ” it said.

UOB Kay Hian Research said at its target price, the stock will trade at 15 times 2021F PE and five times enterprise value/earnings before interest, tax, depreciation and amortisation (EV/Ebitda), which it believes is fair given its market capitalisation.

“We believe the stock offers an attractive dividend yield, underpinned by active capital management as the company goes into the third regulatory period (RP3) review towards end-2021.

“Key rerating catalysts for the stock include: a) active capital management; b) a fair outcome from RP3; and c) operational savings from Tenaga’s reorganisation exercise, ” it said.

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