OSK Research is maintaining its Buy on TENAGA NASIONAL BHD [] with a Target Price of RM9.90 as it raises its profit forecast and expects the strengthening ringgit to help contain coal costs.
The research house said on Tuesday, Sept 14 electricity demand in Peninsular Malaysia, as announced by the power giant, showed normalisation in its growth trend for July. Instead of the double digit growth year-on-year recorded for the months of January through June, July 2010 only showed a growth of 5.2%.
“Nonetheless, given the still above expectation numbers, we revise up our Group wide electricity sales growth for FY10 to 7.7% from 7.3% previously. However, we offset this with a slight reduction in our effective tariff rates to remain conservative.
“Our net profit forecasts are raised by 3% on the strong Ringgit. Despite the more than 5% rally in share price since its one-for-four bonus issue was announced late August, the strength of the Ringgit which helps contain coal costs and positive sentiment on the bonus issue leads us to maintain our Buy call,” OSK Research said.
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