TNB weighs listing of power generation unit

UOB Kay Hian research said it is maintaining its “buy” call on TNB with a target price of RM13.70.

PETALING JAYA: News that Tenaga Nasional Bhd (TNB) is mulling listing its power generation business on the local stock exchange is seen as positive by UOB Kay Hian.

The research firm said it is maintaining its “buy” call on TNB with a target price of RM13.70.

Bloomberg reported that the utility giant is considering listing its power generation business on Bursa Malaysia next year following a corporate reorganisation. Quoting sources, it said TNB is working with an adviser on its planned restructuring, and aims to finish the process as soon as the first half of next year.

Upon completion, the plan is for a listing by introduction of the generation business, where investors would be given shares in the unit in proportion to their existing holdings in TNB.

According to UOBKH, this is seen as a monetisation exercise, and it deems the newsflow positive to share price.

‘“In the past, TNB 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 TNB’s regulated assets), ” it said in a report.

UOBKH said at its target price, the stock would trade at 15 times 2021 forecast price to earnings and five times enterprise value/earnings before interest, tax, depreciation and amortisation, 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 re-rating catalysts for the stock include an active capital management, a fair outcome from RP3 and operational savings from TNB’s reorganisation exercise, ” it said.

Bloomberg reported that deliberations are at an early stage and there is no certainty the deal will proceed.

TNB counts state-owned sovereign wealth fund Khazanah Nasional Bhd and the Employees Provident Fund among its largest owners.

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