KLSE: TENAGA

TENAGA NASIONAL Target Price:

Utilities / Electric Utilities & IPPs / Electric Utilities 8.87 (MYR)

High limit: 8.88 (MYR)
Stop Loss: 9.035 (MYR)

Analyst: Nur Diyana Qistina Khairil Anuar Report Date: 13 / 05 / 2022

BUY COMPANY STOCK SUMMARY

TABLE OF CONTENTS Company Name: Tenaga Nasional
Website: https://www.tnb.com.my/
Stock Fundamental Analysis Nature of Business: Energy industry
1.Company stock summary Category: Utilities / Electric
2.Business Review KLSE Listing Board: Main Market
3.Financial Performance Review Stock Code: TNB; TENA, MYX: 5347
4.Stock Prices and Dividend Review
5.Analyst stock recommendation BUSINESS REVIEW
based on fundamental analysis
Tenaga Nasional Berhad is a Malaysian company that generates,
transmits, distributes, and sells energy both domestically and
abroad. It manages and operates the National Grid, which is
connected to Thailand and Singapore's transmission system.
Tenaga Nasional Berhad also supports independent power
producers and operates and maintains thermal generation facilities
and hydroelectric power generating schemes. It also develops
district cooling systems, operates and maintains cogeneration
plants, manufactures, sells, and repairs distribution, power, and
earthing transformers, and develops, owns, and manages dry bulk
terminals.

The company offers turnkey contracting for transmission
substations, repair and maintenance services for heavy industries
and other related services for telecommunication equipment and
data centres, higher education and telecommunication and IT
infrastructure solution and services, R&D services in engineering,
and many more.

There is no doubt that TNB is Malaysia's major power provider. In
order to ensure the long-term viability of TNB, they also implement
projects such as renewable energy and other environmental and
social activities. This has made TNB one of Asia's major electric
firms as they convert it into a domestic and regional champion.
TNB has established a reputation in the area. Peninsular Malaysia,
Sabah, and Labuan are home to 4.5 million TNB users. Commercial
clients at TNB are our second-largest source of revenue, and they
are responsible for the majority of the economic activity here.
TNB's residential clients make up the bulk of Malaysia's population
of 32.37 million people. TNB's biggest customer base is putting a
lot of pressure on TNB to produce the best goods and services
possible.

TENAGA NASIONAL Target Price:

Utilities / Electric Utilities & IPPs / Electric Utilities 8.87 (MYR)
Analyst: Nur Diyana Qistina Khairil Anuar
High limit: 8.88 (MYR)
Stop Loss: 9.035 (MYR)

Report Date: 13 / 05 / 2022

FINANCIAL PERFORMANCE REVIEW

Financial statements give an overall picture of the health of a company's finances, as well as
information on its productivity, business operations and cash flow. A company's income,

costs, profitability, and debt are all detailed in its financial statements, which are mandatory
reading for every business owner.

FIVE-YEAR FINANCIAL SUMMARY

FYE 31 Dec 2017 2018 2019 2020 2021
Revenue (RMm) 15,692.2 50,392.5 50,939.7 43,976.0 52,629.5
Operating profit (RMm) 3,014.0 6,875.6 8,206.8 7,358.8 8,083.0
Pretax/zakat profit (RMm) 2,843.5 5,046.6 5,477.7 4,235.4 4,738.3
Net profit (RMm) 2,622.3 3,723.7 4,529.2 3,592.7 3,661.8
Property, plant/equipment (RMm) 104,807.6 111,445.5 109,966.0 112,596.1 114,105.
Total asset (RMm) 144,250.0 153,695.0 178,847.2 181,433.3
Total borrowings (RMm) 41,443.7 47,832.4 45,411.7 49,452.6 6
Total liabilities (RMm) 86,261.0 94,643.1 119,565.1 123,983.4 182,600.6
Share capital (RMm) 11,199.6 11,446.1 11,446.1 11,675.2 51,678.2
Shareholders equity (RMm) 57,989.0 59,051.9 59,282.1 57,449.9 124,208.2
Basic earnings Per share (sen) 11,927.6
Diluted earnings Per share (sen) 46.32 65.62 79.64 63.06 58,392.4
Gross dividend earnings Per share (sen) 46.21 65.39 79.64 62.79
Share price as at reporting date (RM) 21.41 53.27 100.00 80.00 64.05
Return on assets (%) 15.26 13.60 13.26 10.42 63.73
Return on shareholders' equity (%) 5.3 2.4 40.00
EBITDA margin (%) 13.2 3.2 2.8 7.4 9.34
Interest coverage (%) 32.3 8.3 8.5 40.9
Debt-equity net cash ratio 9.5 26.5 36.1 2.6
0.44 7.9 5.4 4.9 8.0
0.50 0.53 0.63 35.7
5.0
0.73

Source: Tenaga Nasional Berhad Integrated Annual Report 2021

TENAGA NASIONAL Target Price:

Utilities / Electric Utilities & IPPs / Electric Utilities 8.87 (MYR)
Analyst: Nur Diyana Qistina Khairil Anuar
High limit: 8.88 (MYR)
Stop Loss: 9.035 (MYR)

Report Date: 13 / 05 / 2022

FINANCIAL PERFORMANCE REVIEW - cont

60,000 5,000

Revenue (RMm) 4,000
Net Profit (RMm)
40,000

3,000

2,000

20,000

1,000

0 2018 2019 2020 2021 0 2018 2019 2020 2021
2017 2017

Revenue and net profit are the best indicators in identifying whether or not the company is performing
positively or not. Based on the findings from TNB's annual report, it shows that both revenue and net
profit were increasing from 2017 until 2019. However, it did declined from 2019 to 2020 due to what I
strongly believe the effect from the COVID-19 pandemic. It is not shocking to see the drastic decline as
during the pandemic most big industries are unable to operate and due to that, utility uses are declining
which results to the reduce of revenue and profit. However, both revenue and profit started to increase
from 2020 to 2021 because industries are slowly starting to re-operate.

RETURN ON ASSET RATIO

5.3% 3.2% 2.8% 2.4% 2.6%

2017 2018 2019 2020 2021

The return on total assets ratio reflects how successfully a firm's investments produce value, making it
a significant metric of efficiency for a corporation. In order to arrive at this figure, divide the company's
net income by the total assets and multiply the result by 100%. TNB's ROA actually fluctuated starting
from 2018 until 2020. The ratio is at the lowest during 2020 which indicates that TNB is unable to
obtain high profit from the given level of assets compared to the previous year. However, it did rose
slightly in the year 2021 which shows improvement towards the company.

TENAGA NASIONAL Target Price:

Utilities / Electric Utilities & IPPs / Electric Utilities 8.87 (MYR)
Analyst: Nur Diyana Qistina Khairil Anuar
High limit: 8.88 (MYR)
Stop Loss: 9.035 (MYR)

Report Date: 13 / 05 / 2022

FINANCIAL PERFORMANCE REVIEW - cont

RETURN ON EQUITY

13.2% 8.3% 8.5% 7.4% 8%

2017 2018 2019 2020 2021

It is possible for shareholders to assess the effectiveness of management's use of equity financing via
the use of ROE, which is one of the key financial statistic. The net income is compared to the
company's equity from this ratio. The ROE of TNB fluctuates throughout 2017 to 2021. It declined
from 13.2% to 8.3% in the year 2018, increased to 8.5% in the year 2019, declined to 7.4% in 2020 and
rose to 8% in 2021. High ROE indicated that the company is able to obtain high profit from the given
level of equity. The fluctuation shows that TNB can be unpredictably efficient and inefficient in
generating profit each year.

INTEREST COVERAGE (%)

10

7.5

5

2.5

0 2018 2019 2020 2021
2017

Interest coverage ratio of an organisations are used so the firm can decide if they can pay off its loans.
The ratio is computed by dividing EBIT by the company's interest expense. The greater the ratio, the
more prepared it is to pay its obligations. Creditors might use the ratio to assess whether they will lend
to the firm. Based on the above chart, the interest coverage ratio decreases from 2017 to 2020 and
rose very slightly in the year 2021. Therefore, based on the interest coverage above, it may be
unattractive to investors as it is declining throughout the years.

TENAGA NASIONAL Target Price:

Utilities / Electric Utilities & IPPs / Electric Utilities 8.87 (MYR)
Analyst: Nur Diyana Qistina Khairil Anuar
High limit: 8.88 (MYR)
Stop Loss: 9.035 (MYR)

Report Date: 13 / 05 / 2022

FINANCIAL PERFORMANCE REVIEW - cont

EBITDA MARGIN

32.3% 26.5% 36.1% 40.9% 35.7%

2017 2018 2019 2020 2021

The EBITDA margin of a corporation may be used to evaluate the success of a company's cost-cutting
initiatives. The smaller a firm's operational expenditures are as a percentage of total sales, the better
its EBITDA margin.
Based on the chart above it shows that the EBITDA margin fluctuates throughout the years. The
highest EBITDA margin was on 2020, however it decreased to 35.7% in 2021 and that indicates
improvement towards TNB as lower EBITDA margin is much likely preferred because lower EBITDA
margin will provide higher profit.

DEBT TO EQUITY NET CASH RATIO (%)

2017

2018

2019

2020

2021 0.25 0.5 0.75
0

A company's capacity to satisfy its financial commitments is a key factor in its value, and it is often
regarded as one of the most essential business measures. Therefore, debt to equity net cash ratio is
very important. An optimal level of DE ratio must not exceed 2 and based on above chart, the DE ratio
of TNB from 2017 to 2021 did not exceed 2 and this shows that TNB has minimum debt with low risk
and can also survive during liquidation.

TENAGA NASIONAL Target Price:

Utilities / Electric Utilities & IPPs / Electric Utilities 8.87 (MYR)
Analyst: Nur Diyana Qistina Khairil Anuar
High limit: 8.88 (MYR)
Stop Loss: 9.035 (MYR)

Report Date: 13 / 05 / 2022

STOCK PRICES AND DIVIDEND REVIEW

10

7.5

5

2.5

0
1 Nov 29 Nov 27 Dec 24 Jan 21 Feb 21 Mar 18 Apr

Although Tenaga Nasional Berhad is a monopolistic firm in Malaysia's electrical business, it
stock prices is seemed to be decreasing by time. Tenaga Nasional Bhd’s stocks have already
been selling for lower than the RM11 mark since Nov 19 last year despite successive quarters
of profit growth and a dividend distribution for fiscal year 2020. A year after paying dividends of
RM1.50 per share, the stock has lost 16.3% of its value. Officials in the industry believe that the
growth in power consumption has not been significant, therefore Tenaga will not have to spend
much money on capital expenditures. Also, oil prices were typically low the entire of last year.
They just picked up this year. Hence, this could be one of the factors that led towards the
downward of share prices of TNB.

Source: Seeking Alpha: Dividend History ofTenaga Nasional Berhad DIVIDEND HISTORY The payouts are made semi-annually and as shown,
the dividend actually fluctuates throughout the
0.5 years, however, due to the removal of the MCO in
0.4 2021, more firms have been permitted to operate,
0.3 TNB's subsidiary companies have also seen an
0.2 increase in sales contributions. Profit After Tax
0.1 (PAT) for the year showed strong development,
gaining 6.9% year-on-year to RM3.86 billion from
0 RM3.62 billion a year before. A final single-tier
dividend of RM0.18 per share was issued by TNB's
May 17Dec 17 18 Mar 19 19 21 Mar 22 board of directors after considering its obligations.
18 20 21 This, in addition to their interim dividend which takes
20 their total dividend distribution for the year to
RM0.40 per share, or RM2.29 billion, which is
comparable to 52.8% of TNB's Profit After Tax and
Minority Interests (PATAMI) for the year.

Apr May Mar
Sept March Sept

Sept

TENAGA NASIONAL Target Price:

Utilities / Electric Utilities & IPPs / Electric Utilities 8.87 (MYR)
Analyst: Nur Diyana Qistina Khairil Anuar
High limit: 8.88 (MYR)
Stop Loss: 9.035 (MYR)

Report Date: 13 / 05 / 2022

ANALYST STOCK RECOMMENDATION BASED ON

FUNDAMENTAL ANALYSIS

In general, although Tenaga Nasional Berhad is a very famous company, we can never know their
actual performance unless we did a very thorough review on their financial statements. The
statements can be on of the best indicator especially in helping investors to decided whether or not
they should invest. Since dividends are typically paid from business earnings, a payout that exceeds a
firm's earnings puts the dividend at higher danger of reduction. Tenaga Nasional Berhad is paying out
around 62% of its earnings, a standard dividend amount alongside many firms. However cash flow is
often more significant than profitability in order to determine dividend stability. With that being said,
TNB should constantly verify whether they earned adequate cash to finance its payout. Unfortunately,
just 46% of its free cash flow was paid out last year.

It is indeed excellent to note that Tenaga Nasional Berhad's payout is supported by both earnings and
cash flow, because this is often an indication that the payout is stable, and a smaller dividend yield
normally signals a higher degree of safety before the payout is reduced.Firms with declining profits are
risky for dividend owners. The company's worth might collapse if it experiences a slump in operations
and has to slash its payout. Over the last five years, the profits per share of Tenaga Nasional Berhad
decreased by almost 13% annually. Ultimately, as profits per share drop, the amount of the money from
which dividends may be paid, diminishes.

The primary method most traders will examine a company's dividend possibilities is by reviewing the
historical rate of dividend increase. An aggregate of 15% annually has been added to Tenaga Nasional
Berhad's payout during the previous decade. That is indeed fascinating, but the only way to maintain a
rising dividend in the face of decreasing profits is to distribute an increasing share of the company's
profits to shareholders. Even if this is beneficial to stockholders, it will not last in the long run.

In a summary, the payout ratios of Tenaga Nasional Berhad are within a safe area. Falling profits are a
significant worry, though, and might represent a danger to the return ahead and with that being said,
Tenaga Nasional Berhad's dividend yield does not particularly excites me. For those who don't
prioritise dividends, it's important to be aware of the additional dangers that Tenaga Nasional Berhad
confronts. My study indicates few danger indicators for Tenaga Nasional Berhad that I highly urge
investors really need to take a look at before investing in the firm. Tenaga Nasional Berhad stock can
be a poor, high-risk alternative for investors aiming for big returns in short term. TNB's current real-time
pricing is 8.960 MYR on 2022-05-11, however the value of one's present investment may decrease in
the future.

REFERENCES

Bloomberg - Tenaga Nasional Berhad. (n.d.). Bloomberg.
https://www.bloomberg.com/quote/TNB:MK

Company Profile: Tenaga Nasional Bhd. (n.d.). Bursa Malaysia.
https://www.bursamalaysia.com/trade/trading_resources/listing_directory/company-profile?
stock_code=5347

Dividend Growth History. (n.d.). Seeking Alpha.
https://seekingalpha.com/symbol/TNABY/dividends/dividend-growth

TENAGA (5347), TENAGA NASIONAL BHD - Market Watch | The Star. (2019, July 29). The Star.
https://www.thestar.com.my/business/marketwatch/stocks/?qcounter=TENAGA

Tenaga Nasional Berhad: Integrated National Report 2021. (2021). Tenaga Nasional Berhad.
https://www.tnb.com.my/assets/annual_report/TNB_IAR_2021.pdf

Tenaga Nasional Berhad (KLSE:TENAGA) - Share price, News & Analysis. (2022, May 10). Simply
Wall St. https://simplywall.st/stocks/my/utilities/klse-tenaga/tenaga-nasional-berhad-
shares#valuation

Tenaga Nasional Berhad Stock Chart. (n.d.). Yahoo Finance.
https://finance.yahoo.com/quote/5347.KL/chart?
p=5347.KL#eyJpbnRlcnZhbCI6ImRheSIsInBlcmlvZGljaXR5IjoxLCJ0aW1lVW5pdCI6bnVsbCwiY2Fu
ZGxlV2lkdGgiOjEzLjUxMTkwNDc2MTkwNDc2MywiZmxpcHBlZCI6ZmFsc2UsInZvbHVtZVVuZGVyb
GF5Ijp0cnVlLCJhZGoiOnRydWUsImNyb3NzaGFpciI6dHJ1ZSwiY2hhcnRUeXBlIjoibGluZSIsImV4dG
VuZGVkIjpmYWxzZSwibWFya2V0U2Vzc2lvbnMiOnt9LCJhZ2dyZWdhdGlvblR5cGUiOiJvaGxjIiwiY2
hhcnRTY2FsZSI6ImxpbmVhgIwiOnsidHlwZSI6InZvbCB1bmRyIiwiaW5wdXRzIjp7ImlkIjoi4oCMdm9
sIHVuZHLigIwiLCJkaXNwbGF5Ijoi4oCMdm9sIHVuZHLigIwifSwib3V0cHV0cyI6eyJVcCBWb2x1bW
UiOiIjMDBiMDYxIiwiRG93biBWb2x1bWUiOiIjZmYzMzNhIn0sInBhbmVsIjoiY2hhcnQiLCJwYXJhbW
V0ZXJzIjp7IndpZHRoRmFjdG9yIjowLjQ1LCJjaGFydE5hbWUiOiJjaGFydCIsInBhbmVsTmFtZSI6ImN
oYXJ0In19fX0-

TNB’s 4Q profit down 28% to RM877.8m, declares 18 sen dividend. (2022, February 24). The Edge
Markets. https://www.theedgemarkets.com/article/tenaga-4q-net-profit-down-rm878m-rm121b-
year-earlier

Wall St, S. (2022, March 25). Income Investors Should Know That Tenaga Nasional Berhad
(KLSE:TENAGA) Goes Ex-Dividend Soon. Simply Wall St News.
https://simplywall.st/stocks/my/utilities/klse-tenaga/tenaga-nasional-berhad-
shares/news/income-investors-should-know-that-tenaga-nasional-berhad-kls-1