Tenaga Nasional Bhd., Malaysia’s state-owned electricity utility, fell to its lowest level in nine months after it submitted a bid for the power assets of debt-ridden investment company 1Malaysia Development Bhd.
The stock slid 2.4 percent to 12.36 ringgit to its lowest close since Oct. 2. The company made a non-binding proposal to buy five domestic and eight foreign power assets of 1MDB’s Edra Global Energy Bhd. There’s no assurance any transaction will be concluded, it said in a statement Wednesday.
The proposal comes a month after Tenaga announced a takeover of another power project of state-owned 1MDB. The shares have slumped 18 percent from a record reached on Jan. 23 on concern the buyouts will strain its cashflow and incur more borrowings. 1MDB, whose borrowings reached 41.9 billion ringgit ($11 billion) through March 2014, flirted with default earlier this year after delaying payment on a 2 billion ringgit loan.
The proposal “may be seen negatively due to potential concerns of over-paying for these assets,” Lim Tee Yang, analyst of Affin Hwang Investment Bank Bhd., wrote in a report dated Wednesday. “Tenaga’s balance sheet may become strained with the leverage required to acquire Edra’s assets.” Affin Hwang downgraded the stock to hold from buy and lowered its price target to 12 ringgit from 15 ringgit.
Tenaga said the proposal would be a strong fit for its growth strategy. 1MDB, set up more than five years ago to build infrastructure, has drawn criticism from lawmakers for its rising borrowings. The company announced plans in February to dismantle its assets.