KUALA LUMPUR (June 27): CIMB Investment Bank Bhd said it expects no tariff hike by Tenaga Nasional Bhd (TNB) before July, which may cause short-term weakness in the national utility company’s share price.
The research house said that a tariff hike announcement now will result in a public backlash, especially after the recent controversy on the direct award of the Track 4A project involving the consortium of TNB, YTL Power Bhd and SIPP Energy Sdn Bhd.
“Given the current backdrop of events, we think that there is a strong chance that there will be no tariff hike announcement before the beginning of July.
“However, we remain confident that the fuel cost pass-through (FCPT) mechanism would be implemented soon, as MyPower Corp. had said recently that it would recommend the cabinet to stay on course with the implementation of the FCPT,” wrote the research house in a note today.
CIMB said it expects the tariff hike to be delayed by 1 to 2 months, which may result in short-term weakness in the stock, but said that any weakness in the share price is an opportunity to accumulate.
The research house said it remains optimistic on TNB’s outlook for the long term, underpinned by the ongoing sector reforms.
CIMB maintained “add” on TNB at RM12.22, with a target price of RM14.14.
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