ELECTRIC SHOCK IN TENAGA (MALAYSIA STOCK)

There is an electric shock in Tenaga's financial performance. The shock was expected for those who are following this counter closely. State-owned Tenaga Nasional Berhad (Tenaga) is the sole electricity utility provider for Malaysia and has recently posted the highest quarterly loss in six years and their executives are expecting a weaker performance for this year, especially if the Ringgit weakens. Tenaga Chief Executive Che Khalib Mohamad Noh told reporters it will be tough to meet analysts'' forecast of a net profit of RM2.12 billion for the fiscal year ending Aug. 31. The main reason were slower growth in electricity demand, higher coal prices and weaker ringgit.

The company reported a loss of RM944.1 million from a net profit of RM1.51 billion a year earlier for the fiscal first quarter ended Nov. 30 although quarterly revenue increased 27.2%. The biggest loss was its foreign exchange loss which amounted to RM1.4billion. Higher fuel costs and payments to independent power producers cause its operating expenses to rise 48.9% on year to MYR7.06 billion

I believe that the investors are already expecting this in 12 January when price went as high as RM6.85 and closed at RM6.50. On the chart, this is a bearish reversal pattern. Price continued to fall since then and is now at RM5.95. Although news were reported after the market closes yesterday, the market did not overact to the bad news. From RM6.50 to RM5.95, the news is already discounted in the price fall. Price fell 8.5% in 6 days.

Now the question is whether the price of Tenaga going to continue to fall or shall it rebound. Before analyze the price chart of Tenaga, let's take a look at analysts' price forecasts after the loss announcement. Among the bearish forecasts are Morgan Stanley (RM5.69) and Maybank (RM5.45). Bullish forecasts from Goldman Sachs (RM8.20), Affin Investment (RM6.90), MIMB (RM6.80) and OSK (RM9.15). Bullish forecast average is RM7.76 and bearish average is RM5.57.

Price of Tenaga was RM9.00 on November 30 and the price today is RM5.95. This means that the share price has declined 33% on year. If we are comparing with price in the beginning of the year 2007 when the price averaged about RM12.00, price has fallen 50%. The company market capitalization wiped out about RM26billion since early 2007.

The price trend has been down since July 2007 and this can be defined by the down trend line. Price is relatively oversold and is currently just above the support level of RM5.80. The increasing Relative Strength Index (RSI) indicator indicates bullish strength despite the sideway price action. The bullish momentum and the overold level may trigger a technical rebound.

The price movement today was supported well and a "Doji" pattern is formed on the chart. A Doji is a Japanese Candlestick chart pattern which indicates uncertainty. When price were certain in the past few days (downward) and uncertain now, it may trigger a reversal.


Daily Tenaga chart as at 20 Janaury 2009 using NextVIEW Advisor. Click on chart to view enlarged chart.

Therfore I expect the price to rebound at current level to a target price of RM7.00 (which is the down trend line level), as long as the price stays above RM5.80 or as long as the RSI indicator is able to hold above 35. Current RSI reading is 40.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.