TNB’s tariff conundrum

• 14 years ago (2010-01-23)
• David Flin

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It is expected that TNB will secure a small tariff increase, as the adjustment is needed to reflect higher fuel prices as well as the Government’s ongoing initiative to reduce its subsidy expenses. However, some analysts say that they would not be surprised if the Cabinet were once again to decide to postpone revision of the tariff, as such a move would be very unpopular with consumers, especially considering the reduction in sugar and petrol subsidies, resulting in higher prices. Market expectation has been that the Government will allow a rise in tariffs.

While a tariff delay is unlikely to affect the strong earnings projections that most analysts have for TNB, such a development will dampen investment sentiment. Chris Eng, Head of OSK Research, said that he believed that the market’s disappointment over a tariff delay would put TNB shares under strong selling pressure, despite the probability of earnings upgrades based on the company’s strong performance. On a positive note, Eng viewed any selling as an opportunity to buy, given the improving fundamentals of the company.