Tenaga Nasional Bhd Reports First Quarterly Loss in Over Seven Years

Results and Financial Performance of Tenaga Nasional Bhd in FY18 and Q4 2018

KUALA LUMPUR: Tenaga Nasional Bhd

Tenaga posted its first quarterly loss in more than seven years on higher operating cost and increased impairment of financial instruments.

Net losses in the three-month ended Dec 31 was RM134mil, the company said today. Operating profit in the fourth quarter fell to RM697mil compared with RM1.47bil registered in the preceding quarter on lower revenue and increase in impairment of financial instruments.

The disappointing results pulled down the group’s full year (FY18) net profit to RM3.72bil, or 65.6 sen a share. CIMB Research, in a report last month, had predicted that TNB’s full year earnings would come in at around RM5bil.

“In the interest of maximising our shareholders through dividend, the board of directors has approved 56% dividend payout ratio from the Group’s adjusted PATAMI of RM5.42bil,” chairman Tan Sri Leo Moggie said in a statement.

This translates to a total payout of 53.27 sen per share for FY18, of which 23 sen per share will be distributed as the final single tier dividend.

In 2018, TNB recorded higher revenue at RM50.4bil on the back of higher sales of electricity.

But the group’s earnings before interest, tax, depreciation and amortisation (EBITDA) fell to RM13.37bil. This was due to the lower allowable return of 7.3% under the incentive based regulation (IBR) RP2 (2018 – 2020) compared to 7.5% in RP1 (2014-2017).

“Under RP2, the regulator introduced a revenue cap for the distribution network business and TNB has returned RM639mil back to the consumers for 2018,” it said.

The group’s results in 2018 were also affected by one-off cost of impairments on investments, as well as foreign exchange translation losses of RM390mil due to the weakening of ringgit.

Going forward, TNB expects the Malaysian economy to remain on a steady growth path with private sector demand expected to be the main driver of growth.

“Given the aforementioned scenarios, the electricity demand growth and performance of the group is expected to remain stable for FY19,” it said.

Meanwhile, TNB president and CEO Datuk Seri Ir. Azman Mohd said TNB has incurred a total of RM11.82bil capital expenditure (capex) in 2018 for maintaining, improving and modernising the power infrastructure.

“On the back of stable returns ensured by IBR has enabled us to reinvest heavily into ensuring the reliability and sustainability of the national grid while enabling increasing investments in renewable energy,” he said.

The company, in 2018, has increased its renewable energy (RE) generation capacity to 73.2MW through a 50MW Large Scale Solar (LSS) project in Mukim Tanjung 12, Sepang, in addition to a few joint ventures in biomass and biogas power stations.

TNB’s most recent venture is through its RE subsidiary, GSPARX, where the company offers self-generation financing packages for solar photovoltaic panels for commercial, industrial and residential customers.




Question(s):-

a)You are required to analyse the performance of Tenaga by sourcing information from various credible sources with the most critical information to help investors to make an informed decision.

b)Using the THREE (3) years analysis with focus in the most recent years, evaluate the company stock performance using relevant financial ratios, theories and concepts you have learned in the class lecture. You are encouraged to refer to learning materials outside of class context.  

c)Within the report you required to also integrate an equity valuation to estimate intrinsic value of Tenaga. Show your working to support your answer. Compare stock price as at 31st Dec 2018 to intrinsic value of the stock. Determine whether the chosen stock is buy, hold, or sell. (provide supporting statistics, facts, literature, to support your analysis).

d)In the application of behavioral finance, synthesis the current development of financial market environment and identify the opportunities that investors can undertake to enhance their equity investment return.