Tenaga Nasional Bhd (TNB:MK) is the largest electrical related company in Malaysia. It is the sole distributor of electricity in Peninsular Malaysia and is involved in generating, transmitting and distributing electricity all over Malaysia. What is the prospect of this electrical juggernaut? Here are three things you need to know about TNB.
1) Core Segments of Business
TNB owns 6 thermal power stations and 3 hydroelectric power generating schemes in Peninsular Malaysia. Furthermore, with the output from two independent power plants that it controls, TNB has 41.6% of the total power generation capacity in the peninsula in FY2013. The company has a total installed capacity of 9,041 MW, many from thermal plants fueled by coal and natural gas. TNB has also ventured into oversea market in Pakistan with TNB Liberty Power Limited of Pakistan.
Transmission bridges the electricity supply connection between different power plants network to the distribution system of the company. The company plans, develops, operates and maintains the National Grid System. The company is in the mist of upgrading and transforming the National Grid System to a whole new level.
Similar to its transmission business, TNB is the sole distributor of electricity in Peninsular Malaysia.
The company has seen its revenue increased from RM30.3 billion in 2010 to RM42.8 billion in 2014. That is an annual growth rate of about 9%. Its net profit grew at a much faster pace, shooting up from RM3.2 billion in 2010 to RM6.5 billion in 2014, chalking up a growth rate of 19% annually. The company boost a return on equity of 10% to 16% for the past 5 years and has maintained its gearing ratio below 40% in 2014.
TNB still obtains more than 90% of its revenue from Peninsular Malaysia. The company distributes electricity to all segment of clients, from industrial to commercial to domestic retail users. Although 82% of its customers are domestic retail clients, the domestic sector only contributes 18.4% of the group sales in term of monetary value. The largest contributor to the revenue is the commercial sector, contributing 41% of the group’s revenue in 2014.
Value In Action
Malaysia is still a developing nation with electricity usage increasing steadily. If investors are interested in the electricity sector in Malaysia, TNB is one company that investors cannot afford to not analyse.
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All views and opinions articulated in the article were expressed in Stanley Lim’s personal capacity and does not in any way represent those of his employer and other related entities. Stanley Lim does not own any companies mentioned above.
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