TNB’s Tariff Formula Catalyst For Re-Rating - Starbiz

02/09/2005

Citigroup Research believes that the reinstatement of TNB’s tariff formula along with ongoing potential improvements being undertaken at the utility company would be catalyst for investors to buy the stock, even though the potential share overhang in Tenaga Nasional arising from the conversion of its exchangeable bonds and employee share option scheme (ESOS) may be of concern among investors. Although TNB has indicated that it intends to reduce it’s gearing, Citigroup believes that TNB would probably place the exchangeable bonds at the lower end of the list of debt to be retired. Commenting on the ESOS issue, it believes the efficiency of the market has played out since the initial conversions of ESOS shares were met with price weakness in TNB share price. It also believes that government-linked shareholders would unlikely be in a hurry to sell their shares and that any private placement by TNB would be considered after position of the regulators on the subject is clearer.