PETALING JAYA: Kenanga Analysis is sustaining its “chubby” name on Malaysian utility firms, given their defensive earnings profile and first rate dividend yields.
In a report yesterday, the analysis home famous that the utilities sector is commonly perceived to be “a boring” section, contemplating its “less-than-exciting gross home product growth-like earnings”.
“Nonetheless, this helps the sector sail by financial downturns, given its regulated enterprise atmosphere and the Covid-19 pandemic interval has certainly demonstrated such earnings defensiveness for the sector’s gamers.
“The regulated atmosphere has additionally helped to maintain their above-average dividend yield of between 4% and seven%,” it mentioned.
Kenanga Analysis famous that earnings of Tenaga Nasional Bhd (TNB), Petronas Fuel Bhd (PetGas) and Fuel Malaysia Bhd have been pretty resilient, having been regulated beneath the Incentive-Primarily based Regulation (IBR) framework. The IBR framework promotes cost-efficient tariff construction for patrons.
Moreover, the analysis home famous that the earnings of unbiased energy producers Malakoff Corp Bhd and YTL Energy Worldwide Bhd had been backed by an influence buy settlement, with new property serving to to bridge earnings gaps.
“In the meantime, area of interest utility infrastructure participant Pestech Worldwide Bhd provides an thrilling development story in Cambodia, coupled with promising rail electrification contract flows within the area.”
Kenanga Analysis additionally mentioned Pestech’s key initiatives in Malaysia and Cambodia had been advancing into greater phases and can result in higher margins in 2022.
“Going ahead, its present order guide of RM2bil will preserve the corporate busy for the following two to a few years. We nonetheless just like the inventory as a distinct segment utility infrastructure play,” it mentioned.
Individually, Kenanga Analysis famous that the federal government had permitted and determined to implement the Regulatory Interval 3 (RP3) beneath the IBR from February 2022 to December 2024.
“After greater than a 12 months’s delay as a result of pandemic, the RP3 for the facility business was formally began from February 2022 with an unchanged regulatory return of seven.3%.”
In mild of this, the analysis home mentioned TNB’s earnings will stay resilient sooner or later so long as the IBR is in place.
Just like TNB, Kenanga Analysis famous that PetGas and Fuel Malaysia have additionally demonstrated earnings resiliency throughout the pandemic, due to the IBR framework which safeguards their earnings.
“Actually, Fuel Malaysia has reported commendable outcomes throughout the RP1 interval which began in 2020, which was attributable to a stronger-than-expected margin unfold.”
Kenanga Analysis mentioned PetGas had additionally registered pretty constant earnings over the identical interval. “As such, each PetGas and Fuel Malaysia are anticipated to report resilient earnings with minimal affect from the one-off prosperity tax within the final 12 months of RP1 in 2022,” it mentioned.