Tenaga may find support at RM8.00-9.00

Tenaga broke below its uptrend line support (of RM11.00) in July. This was despite numerous research reports which valued Tenaga at RM14.00-15.00. The value given to Tenaga was due to anticipated strong growth in electricity demand going forward.

Now, we know what has spooked the Tenaga shareholders, which brought on a strong selldown in the stock. It is the same issue that has bedeviled this stock for the past few years, i.e. the revision in the subsidized price of natural gas from Petronas Gas.

OSK has a report entitled "Painful if No Remedy" dated September 24, which projected that an increase in the price of natural gas of 10-60% could reduce Tenaga's earning by 5-34%, if the electricity tariff remained unchanged. Based on this projected earnings, Tenaga's target price could be lowered to RM10.00-13.80. Nevertheless, OSK has maintained its existing BUY call on the stock with an unchanged target price of RM14.55 because no concrete figures have been unveiled. Kenanga has similarly maintained its BUY call on the stock (go here).

Looking at the chart below, we can see that Tenaga can find strong support at RM8.00-9.20. Given the strong selldown, I believe that the rumor could have been substantially factored into the price of Tenaga. As such, Tenaga at the present price level could well be a good BUY, either for a trade or for the long-term hold.


Chart : Tenaga's weekly chart as at October 1 (courtesy of Quickcharts)