Maybank Investment Bank (Maybank IB) is confident that Tenaga Nasional Bhd (TNB) is protected from the risk of demand during the Period of Movement Control (PKP) 3.0 compared to PKP 1.0 last year.
Through its research note today, the investment bank explained that the generation of Peninsular Malaysia decreased by 8.5% during the PKP period which was implemented from June 1 compared to a 24% decrease during the PKP last year.
Bernama reports, as a whole, estimated that the PKP will affect the demand for the 2021 (FY21) financial year at 0.7% on a monthly basis.
Add Maybank IB, as PKP 3.0 has lasted a month, demand in Peninsular Malaysia is still on track to increase this year.
"TNB is largely protected from the uncertainty of demand, with only the 'customer service' segment only exposed to the risk of demand.
"The remaining RM13.8 billion of annual controlled earnings is improved with the lack of claimable from industrial funds. Meanwhile, the issues related to PKPs before this are high bad debts and the loss recorded by Sabah Electricity is not so severe this time in our view, "the investment bank said.
Maybank IB emphasizes its projections on revenue and target price of RM12 for TNB remains unchanged.
"We continue to expect the increase in revenue this year (extension of the year for regulatory period (RP) 2) driven by better regulatory terms.
"We also expect TNB not to be less favorable at RP3 (2022-2024). We choose TNB for its relative income stability factor, "he added.
