| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank report offers an optimistic outlook for an energy sector player, projecting a significant earnings turnaround in the upcoming fiscal year despite current operational setbacks. The report highlights the company’s resilience to recent incidents and strong prospects for future capacity growth, affirming a “Buy” recommendation with a maintained target price.
The report addresses a recent incident on December 13, 2025, involving a coal-lifting crane collapse at the Tanjung Bin Complex during maintenance. While an internal investigation is underway, the incident is not expected to cause major disruption to the operations of Tanjung Bin Power (TBP) and Tanjung Bin Energy (TBE). This resilience is attributed to the complex maintaining up to two months of coal inventory and the expectation that physical damages and potential business interruption will be covered by the group’s insurance policy, drawing parallels to a previous fire incident in October 2025.
The current fiscal year (FY25F) has been marked by several setbacks, including negative fuel margins, a steam turbine crossover pipe leakage in 3QFY25, and the aforementioned fire and crane incidents. These events are expected to result in a capacity payment loss from the TBE fire, which will be reflected in the upcoming 4QFY25 results.
Future Outlook and Growth Trajectories
Looking ahead, FY26F is poised to be a turning point for the company. Earnings are projected to reverse their downward trend, supported by recovery from these unexpected incidents and stabilising coal prices. Crucially, prospects for capacity replenishment are improving significantly. The firm has submitted proposals for both PPA extensions and new CCGT power plants under Categories I and II in response to the Energy Commission’s request for proposals (RFP) for gas power plant capacity. Additionally, negotiations are ongoing with regulators for an additional 2.8GW of proposed CCGT power plants in Kedah and Negeri Sembilan. Securing each 1GW of new CCGT capacity could enhance valuations by approximately 30 sen per share, based on a 100% stake and a conservative 7% Internal Rate of Return (PIRR) over a 21-year Power Purchase Agreement (PPA).
Valuation and Recommendation
The investment bank maintains a BUY recommendation, with an unchanged Sum-of-the-Parts (SOP)-derived target price of RM1.29. This valuation implies a significant upside potential and suggests that any share price weakness presents a compelling accumulation opportunity. The company is currently trading at 4.7x FY26F EV/EBITDA, which is a discount to its historical mean of 5.2x. The report suggests that valuations could re-rate higher towards +1 standard deviation (6.1x EV/EBITDA) given a tightening electricity market and improving prospects to secure new capacity.
