---
endpoint: analytics
pattern: Power
status: done
latency_ms: 194693
conversation_id: 8716dfdd-1206-4c4e-a8cb-23b988b2997e
citations: 4
created: 2026-05-31 19:21:27Z
---

# What’s the bull case bear case for Tenaga?

# Tenaga Nasional (TNB MK / 5347) — Bull vs. Bear Case

CLSA covers Tenaga at **Outperform (O-PF), TP RM17.60** (vs. last referenced price RM14.28 = +23% upside; market cap ~US$19.6bn) [9]. It is listed among CLSA's Malaysia top picks ("MISC, TNB & CIMB the most compelling among our top picks") on the back of attractive valuation and the data-centre power build-out [6][7].

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## Bull Case

**1. Structural demand growth from data-centre boom**
- TNB sits at the centre of Malaysia's data-centre power supply chain. As of FY2025, **35 data centres** were already connected drawing **~850 MW**, against **~4.5 GW of final contracted demand** — implying years of incremental load yet to materialise [12].
- CLSA channel checks point to **~350 MW of new DC demand per year**, with industry power demand reaching **2.63 GW by 2030 (≈14% market share)** and translating into **3.5–4.3% annual electricity growth in 2025–2030** [5].
- Management guides Malaysia's overall electricity demand to grow **3.5%–4.5% in line with GDP**, with peak demand already setting fresh records [13].
- Commercial-segment sales grew **+5.1% YoY in 1Q25**, cushioning industrial weakness; generation EBIT margin recovered to **6.4%** (vs. 4.6% in 2024) after Manjung 4 resumed in Nov 2024 [4].

**2. Regulatory tailwind — Regulatory Period 4 (RP4, 2025-2027)**
- "Power sector reform and differentiated WACC for Regulatory Period 4 (2025-27) will pave the way for Tenaga to benefit from energy exports. Rising demand from data centre will require significant upgrades on national grid and transmission lines" [2].
- TNB is **guaranteed a 7.3% net regulatory return on its regulated asset base** under the new cycle [1].
- **RM26.6bn base capex** is approved under RP4, plus **RM16.3bn contingent capex** likely triggered in 2026-27 if DC roll-out accelerates [4][5]. Higher regulated capex directly grows the regulated asset base (RAB), and therefore future regulated returns.
- In 1Q25, TNB had already spent RM2.79bn (10.5% of base capex) and CLSA expects spending to ramp through 2025 [4].

**3. Earnings resilience and dividend delivery**
- FY2025 results showed PAT growth and a **65.6% dividend payout** (28 sen final + 25 sen interim = 53 sen total DPS) with regulated CAPEX of RM12.0bn invested for the year [11].
- TNB is **one of the few large-cap Malaysian names with positive 2025 consensus EPS revisions** (+0.6% YTD vs. weighted-average -1.7% for the top-15 KLCI constituents) [9].
- Top-picks comp table: **15.5x 2025 PE, 1.3x PB, ~8.4% ROE, 3.4% div yield, 10.6% EPS growth** [9].

**4. Valuation support**
- CLSA's DCF (terminal year 2035, **7.2% WACC**, 60% equity weight, 0.8 beta, 3% terminal growth) yields **RM17.60 fair value** [3][8].
- Treated as an "undervalued laggard" by CLSA — the FBMKLCI has rebounded but TNB lags, while data-centre buildout in Johor "continues apace and should have a positive knock-on effect for power demand" [7].

**5. Fuel-cost normalization is supportive**
- Base tariff (41 sen/kWh) has been steady, with the ICPT surcharge of ~17–19 sen/kWh effectively passing fuel costs through to end customers — limiting margin volatility from coal/gas price swings [10].

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## Bear Case / Risks

**1. Demand risk — DC pipeline is contracted, not yet built**
- The gap between connected load (~850 MW) and contracted demand (~4.5 GW) is the bull case **only if** the contracted pipeline actually energises [12]. Any DC project deferral, hyperscaler capex cut, or policy/permitting friction shifts the contingent capex (and the regulated return on it) into the future.
- Overall 1Q25 electricity demand was already **flattish YoY**, with industrial -5.5% YoY — i.e., the commercial/DC growth is masking weakness elsewhere [4].

**2. Regulatory / political risk**
- CLSA flags **delays in ICPT (Imbalance Cost Pass-Through) compensation** from the government as a key risk — historically this has tied up working capital and pressured cash flow.
- Implied tariff has actually drifted lower (1Q25: 39.6 sen/kWh, -0.7% QoQ) — any politically motivated tariff cap or RP4 revision could compress the regulated return [4].
- Earnings/RAB upside is contingent on regulators allowing the full **RM16.3bn contingent capex** to be triggered and recovered.

**3. FX & balance-sheet risk**
- Net debt/equity of **~59%** is elevated [9].
- Borrowings are partly foreign-currency-denominated — **~14% USD, 3% JPY, 6% GBP, 2% EUR, 2% AUD** — so ringgit depreciation directly hits translation losses and increases servicing costs (this is also why core PATAMI is normalized for FX).

**4. Fuel cost & generation mix**
- 1Q25 generation mix: **gas 42%, coal 53%, hydro 1%, solar 4%** [based on CLSA generation table]. Coal price delivered ran at US$215/mt in 1Q25 vs. US$118/mt in 1Q24, and gas reference price hit RM44/mmBtu vs. RM37.4 a year earlier.
- TNB also faces **structural domestic gas supply constraints** — "Peninsular Malaysia faces growing constraints in domestic gas supply due to declining production from mature fields and rising demand from both the power and industrial sectors… As gas becomes increasingly scarce and market-driven, fuel procurement costs may rise, affecting generation economics" [14]. If pass-through gets delayed, ICPT receivables balloon.

**5. Energy transition execution risk**
- CLSA explicitly cites **"execution on RE journey/target especially in overseas market"** as a risk — large RE/NETR ambitions abroad have a thin track record and capital is being committed against uncertain returns.
- "Questionable acquisitions" are flagged as another risk by CLSA — TNB has historically been seen as a vehicle for non-core M&A.

**6. Crowded trade / share price already reflects DC narrative**
- TNB has materially re-rated since 2023 (CLSA recommendation history: RM9.5 in May 2023 → RM13.7 in Jan 2024 → ~RM14.2 currently with TP RM17.60). After "recent share price run-ups, we would be selective on DC plays" [bull-case originated, but creates valuation risk].
- A pullback in the global AI / data-centre capex cycle (hyperscaler underbuild, Nvidia chip cycle pause) would directly hit the demand pillar that the bull case rests on.

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## Net View
The bull case rests on **a structurally bigger regulated asset base** funded by data-centre-driven grid upgrades, with a guaranteed 7.3% regulatory return [1] and a credible path to triggering the RM16.3bn contingent capex pot [5]. The bear case is essentially "the DC pipeline disappoints, ICPT recovery slips, ringgit weakens, and the stock has already priced in the good news." CLSA's stance is constructive — O-PF, TP RM17.60 — sized to the DC capex acceleration with explicit upside if contingent capex is triggered [3][4].

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**Sources**
- [1][2][3][4][8][10] CLSA — Tenaga - O-PF (Fresh start), 27 May 2025 (607960696LinqAlpha.PDF)
- [5][7] CLSA — Malaysia Strategy (Recovery too quick?), 16 May 2025 (607959705LinqAlpha.PDF)
- [6][9] CLSA — Malaysia strategy (1Q25 results: outlook not as dire), 9 Jun 2025 (607961581LinqAlpha.PDF)
- [11] Tenaga Nasional 4QFY2025 Analyst Briefing slides (27 Feb 2026)
- [12][14] Tenaga Nasional Berhad — Integrated Annual Report 2025
- [13] Tenaga Nasional 1QFY2025 Analyst Briefing slides (28 May 2025)

## Citations

- [11] **Tenaga Nasional Berhad, Q4 2025** · external
- [12] **Tenaga Nasional Bhd. (5347-MY) - Annual Report for period end 31-Dec-2025 (English) - PDF - 5 / 5** · external
- [13] **Tenaga Nasional Berhad Q1 2025 Earnings Call May 28 2025.pdf** · external
- [14] **Tenaga Nasional Bhd. (5347-MY) - Annual Report for period end 31-Dec-2025 (English) - PDF - 4 / 5** · external

