KUALA LUMPUR: Affin Hwang Capital research is cutting its earnings per share forecast on Tenaga Nasional Bhd
(TNB) by 24% to 27% for 2019-20E on guidance towards lower profit from lower regulatory returns and associate losses.
The research house cut TNB's target price to RM13.30 from RM18 and downgraded its recommendation to "hold" from "buy".
TNB management has guided that the profit pase in RP2 should be RM5bil to RM5.4bil, which is lower than what Affin Hwang had forecasted, it said in a research note.
"The difference is due to the price and revenue cap set in RP2, which limits Tenaga’s ability to earn additional returns above the regulated return from its asset base," it said.
It added that losses from overseas associates are also unlikely to recover leading to an impariment of about RM1.065bil for its investment relates to international associates GAMA and GMR.
However, Affin Hwang noted that there are still avenues for profit growth as Jimah East Power is on scehdule to receive COD by end-2019 while South Powert Gneration will receive COD by mid-2020.
TNB is also evaluating the commercialisation potential of its fibre network but is only interested in a wholesale model, it said.
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