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Company Update – Tenaga (BUY, maintain) - Earnings visibility intact, tariff hike by early 2014




Affin Hwang Investment Bank Bhd


12 Aug 2013





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Recent Ringgit weakness is not expected to underscore earnings prowess In view of the recent weakness in Ringgit vis-à-vis US$ and Yen, we run earnings sensitivity scenarios on the potential adverse impact to Tenaga’s bottomline. Since June 2013, the Ringgit has weakened 5% and 9% against the US$ and Yen. Against this backdrop, Tenaga could potentially recognise noncash translation losses in its quarterly earnings as a result of its foreigndenominated debt exposure. As at 31 May 2013, Tenaga had RM2.73bn and RM3.82bn oustanding US$ and Yen-denominated borrowings. We estimate that every 1% depreciation of the Ringgit vis-à-vis US$ and Yen will translate into RM27m and RM37m of translation loss to the Group’s bottomline. That said, translation losses arising from foreign currency movements are omitted in arriving at our FY13 core net profit forecast of RM4bn (PER 12.3x, ROE 10.1%).

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