An informal tariff mechanism in place - BUY

Tenaga Nasional: An informal tariff mechanism in place - BUY -
Mak Hoy Kit

Tenaga Nasional (TNB MK) - BUY
Price 5.95, TP 8.75, Mkt cap $7,127m, Avg t/o $12.7m

An informal tariff mechanism in place

* Management is upbeat on the recent tariff review, akin to an informal cost-pass-through mechanism.

* Main concern is lower electricity demand growth, but we note historical annual growth rates have never been negative.

* Maintain BUY on this deep-value stock. TP of MYR8.75 (WACC of 9.7%). FY09E P/E of 10.4x below 10-year lows.

2009E: Rec EPS 0.57, P/E 10.4, P/B 0.9, ROE 9.4, Yld 3.0
2010E: Rec EPS 0.63, P/E 9.5, P/B 0.9, ROE 9.6, Yld 3.5
2011E: Rec EPS 0.68, P/E 8.8, P/B 0.8, ROE 9.6, Yld 4.0

Mak Hoy Kit
BNP Paribas Capital (Malaysia) Sdn. Bhd.