TNB (HOLD)
2Q12 to Show Profits
- Improved natural gas supply to the sector, stable coal power generation as well as seasonally lower power demand in 2Q12, had reduced reliance on alternative fuels and lowered overall fuel cost to TNB.
- TNB had received total RM2bn fuel compensation from Government and Petronas in Feb 2012, and will be recognised as an EI item. Note that the amount is taxable at 25%.
- Additionally TNB will recognise another RM660m forex translation gain due to appreciation of MYR against US$ and JP¥.
- Expect TNB to report 2Q12 net profits of RM2.7bn and core profits of RM550m.
- However, we believe TNB will revert back to alternative fuels as power demand is expected to peak in Apr-Aug period, while being hit by seasonally lower hydropower generation.
- Maintain Hold on TNB with Target Price of RM6.54.
Source: HLIB Research - 6 April 2012
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