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Tenaga Share Estimates Raised With Third Quarterly Profit

Tenaga Nasional Bhd.’s share-price estimates were raised by brokerages including CIMB Group Holdings Bhd. after Malaysia’s biggest power producer posted a third straight quarterly profit.

The Kuala Lumpur-based utility said it received another 750 million ringgit ($246 million) in state compensation for disruptions in gas supply. This helped it report fiscal fourth-quarter net income of 1 billion ringgit, or 18.4 sen per share, compared with a restated net loss a year earlier of 338.6 million ringgit, or 6.2 sen per share, Tenaga said in a statement yesterday.

The power company has been getting compensation from the government and state-owned energy group Petroliam Nasional Bhd. after disruptions in gas supply forced it to buy costlier alternative fuels to power its plants. It has now received a total 3.15 billion ringgit for disruptions since January 2010, according to the exchange filing.

“Gas supply is sufficient currently until December,” Chief Executive Officer Azman Mohd told reporters in Kuala Lumpur yesterday. After February, “we will see an increase in demand for gas, but we can manage,” he said.

Tenaga shares rose as much as 1 percent to 7.02 ringgit, before paring gains to 7 ringgit as of 10:07 a.m. in Kuala Lumpur. They’ve climbed 18.5 percent this year, outpacing a 9.5 percent gain in the FTSE Bursa Malaysia KLCI Index.

Election Risk

CIMB raised its target price to 8.55 ringgit from 8.40 ringgit and maintained its trading buy rating. This means the stock’s total return is expected to exceed the benchmark KLCI’s return by at least 5 percent over the next three months.

“It is not an outperform due to election risks,” Yeoh Yung-Juen, an analyst at CIMB, wrote in a report today. CIMB also raised its fiscal year 2013-2014 earnings forecasts for Tenaga by between 27 percent and 37 percent, it said. Prime Minister Najib Razak must dissolve parliament for elections by April 28.

RHB Capital Bhd. boosted its fair value to 8.90 ringgit from 7.80 ringgit, analyst Lim Tee Yang wrote in a report today.

The group received 750 million ringgit for disruptions from April to August, Azman said. A total 1.48 billion ringgit of the compensation was booked for its 2012 fiscal year, Chairman Leo Moggie told reporters in Kuala Lumpur.

This helped lift full-year net income to 4.2 billion ringgit from 965.4 million ringgit a year earlier, according to the statement. That exceeded the median estimate of 4 billion ringgit, according to a Bloomberg poll of 16 analysts.

Power Sales

Profit was also boosted by improved electricity sales and a currency gain, Tenaga said. A stronger ringgit against the yen resulted in a full-year translation gain of 93 million ringgit, compared with a loss of 334.6 million ringgit a year earlier, it said.

The group declared a fourth-quarter dividend of 15 sen per share, bringing its total proposed payout for its 2012 fiscal year to 20 sen per share, the filing showed.

“Dividends was a positive surprise,” Prem Jearajasingam, an analyst at Macquarie Group Ltd., said in a report today. “In the medium term, increased earnings visibility will be key to higher dividends.”

Fourth-quarter operating expenses fell 12 percent from a year earlier to 9.33 billion ringgit, as coal costs dropped, Azman said. Tenaga paid an average $92.2 per metric ton for its coal during the period, Moggie said.

The year ahead will be “challenging,” Tenaga said in its statement. “Volatility in the global economy, especially in Europe and the U.S., coupled with the slowdown in the China economy could have an impact on growth and electricity demand,” it said. “Uncertainties in fuel pricing may affect Tenaga’s performance.”

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