Tenaga ... Nov10

Rumors are rife that next on Khazanah’s list to pare down its stake is Tenaga, in which the former holds 35.6% stake. Such a move could help improve the overall liquidity of Tenaga’s stock and give it a push.

The reasoning that has been put forth is the recent sharp drop (end Oct 2010) in Tenaga’s share price given that there has been no fundamental change in the company. The last time Khazanah placed out Tenaga shares, the counter behaved in a similar manner – the other stakeholders tend to sell down to bring down the price. Then, when the placement comes, the shares can be bought back at a cheaper price.

Khazanah’s last placement of Tenaga shares was on Dec 11, 2009, where it disposed of 2% equity stake at RM8.10 a share. At the time shares were trading at RM8.30 to RM8.40, which means Khazanah made its disposal at a slight discount to the market price.

If a similar discount were applied to Tenaga’s current price (mid Nov 2010), Khazanah could be looking to sell the shares about RM8.55 apiece or more.

As Khazanah’s last divestment in Tenaga ii coming up to a year, an announcement could be made over the next two weeks (Nov 2010-Dec 2010). However, Khazanah’s timing may coincide with Tenaga making a significant announcement before the year ends (2010). Tenaga reported that it was close to securing the rights to build a new combined cycle gas turbine in Egypt with a local partner.

Given that Tenaga’s overseas ventures have been few and far between, the announcement of a new project will help attract investor interest. The usual short term catalyst that investors look for Tenaga is a tariff hike, which most believe is unlikely to happen anytime soon.

Timing the placement after announcement of the gas turbine could prove beneficial to Khazanah. While it may push Tenaga’s share price up, it would also make it a more attractive counter, increasing the chances of the placement succeeding.

Others say the drop in Tenaga’s share price could be mainly to coal fears rather than talk of a Khazanah placement. At the moment, the price of coal is expected to continue to rise in coming months.