Business

Published: Thursday June 21, 2012 MYT 11:32:00 AM

Tenaga up, to benefit from lower coal prices


KUALA LUMPUR: Tenaga Nasional's share price inched up on Thursday to RM6.57 on expectations it would benefit from the weakening coal prices where the commodity accounts for one-fifth of its total costs.

At 11.40am, it was up two sen to RM6.57, bucking the weaker market where investors were seen taking some profit after a four-day rally.

Maybank Investment Bank Research said coal prices have retreated by over 20% in the past three months in tandem with the global commodity sell-off.

"This is beneficial for Tenaga as coal is its single largest cost component (about 21% of total cost). Every US$1 tonne decrease in average coal prices for the financial year ending August 2012 will boost earnings by RM47mil or 1.8% from our base forecast profit," it said.

Maybank Research said there was significant scope for earnings upgrades if the current situation persists.

"Maintain Buy, with an unchanged target price of RM7.40 a share based on FY8/13 price-to-earnings ratio (PER) of 13 times, in line with its historical average PER," it said.

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