---
endpoint: analytics
pattern: Power
status: done
latency_ms: 155805
conversation_id: f2cbd74d-bb18-4388-8134-6dbd62cac6f0
citations: 0
created: 2026-05-31 18:26:36Z
---

# How does Tenaga’s valuation compare to peers, and what justifies its premium/discount?

# Tenaga Nasional (TNB MK) — Valuation vs Peers

**Anchor source**: CLSA's most recent CLSA-parent note on TNB — *"Tenaga – O-PF (Fresh start)"*, published 27 May 2025 [10]. Rating: **Outperform (O-PF)**, TP **RM17.60**, implying **+26%** upside from RM13.99 at print [10]. Mkt cap **US$19.3bn**, 3M ADV US$22.3m, KLSE Composite at 1,534.3 [10].

> Note: CLSA's Malaysia coverage in the archive runs through end-June 2025 (latest TNB-anchored note is 27 May 2025). "Latest CLSA view" below refers to that vintage.

---

## 1. Where Tenaga sits in the regional Power/Utilities peer set (FY1, per CLSA's matrix)

Per CLSA's peer/customer matrix (FY1 = next fiscal year, FY0-reported basis) [1]:

| Company | Ticker | Country | Rec | Mkt cap (US$bn) | **PE (x) FY1** | **PB (x) FY1** | **Div yld (%) FY1** | **ROE (%) FY1** | Net D/E (%) FY1 | EPS gr (% YoY) FY1 |
|---|---|---|---|---:|---:|---:|---:|---:|---:|---:|
| **Tenaga** | **TNB MK** | **Malaysia** | **O-PF** | **19.3** | **15.3** | **1.3** | **3.4** | **8.4** | **59.0** | **10.6** |
| YTL Power | YTLP MK | Malaysia | HC O-PF | 6.6 | 9.5 | 1.3 | 2.4 | 14.0 | 163.5 | 0.4 |
| Petronas Gas | PTG MK | Malaysia | O-PF | 8.4 | 19.0 | 2.5 | 4.5 | 13.5 | (1.9) | 2.3 |
| Gas Malaysia | GMB MK | Malaysia | O-PF | 1.3 | 13.4 | 3.4 | 5.6 | 26.5 | (13.5) | (4.9) |
| CLP | 2 HK | HK | N-R | 21.5 | 13.4 | 1.6 | 4.8 | 11.4 | 50.8 | 11.5 |
| China Gas | 384 HK | HK | N-R | 5.0 | 10.3 | 0.7 | 7.0 | 6.9 | 80.3 | (6.0) |
| Duke Energy | DUK US | USA | N-R | 90.5 | 18.5 | 1.7 | 3.7 | 9.6 | 161.9 | 6.9 |
| Xcel Energy | XEL US | USA | N-R | 40.2 | 18.3 | 1.9 | 3.3 | 10.8 | 155.7 | 9.3 |
| Kansai Electric | 9503 JP | Japan | N-R | 12.7 | 6.2 | 0.6 | 4.3 | 10.3 | 128.4 | (39.6) |
| Tokyo Gas | 9531 JP | Japan | N-R | 12.3 | 12.4 | 1.0 | 1.9 | 7.8 | 76.8 | 97.1 |
| Osaka Gas | 9532 JP | Japan | N-R | 10.1 | 10.6 | 0.8 | 2.9 | 7.6 | 53.3 | 1.9 |
| Kogas | 036460 KS | Korea | N-R | 2.6 | 3.8 | 0.3 | 5.2 | 8.4 | 303.3 | (17.5) |
| Gujarat Gas | GUJGA IN | India | U-PF | 3.7 | 27.8 | 3.8 | 0.9 | 14.2 | (4.3) | 0.2 |
| **Peer Average** |  |  |  |  | **13.7** | **1.6** | **3.8** | **11.5** | **93.3** | **5.6** |
| **Peer Median** |  |  |  |  | **13.4** | **1.3** | **3.7** | **10.3** | **76.8** | **1.9** |

Source: CLSA, IBES; IBES for non-covered, CLSA models for covered [1].

### Quick read of the gap

- **PE 15.3x vs peer median 13.4x / average 13.7x** → TNB trades at a **~14% premium to peer median PE, ~12% premium to average** [1].
- **PB 1.3x = peer median 1.3x, ~19% below peer average 1.6x** → **in line on book multiple**, modestly cheap vs DM utilities (DUK 1.7x, XEL 1.9x) but in line with regional names [1].
- **Dividend yield 3.4% vs peer median 3.7% / average 3.8%** → TNB yields **~30-40bps less** than peers [1].
- **ROE 8.4% vs peer median 10.3% / average 11.5%** → **~190-310bps lower returns** than peer set [1].
- **EPS growth 10.6% YoY vs peer median 1.9% / average 5.6%** → TNB is **near top-quartile on FY1 EPS growth** (only CLP, Tokyo Gas materially higher) [1].

---

## 2. Tenaga's own historical valuation context

**PE band history (Bloomberg, CLSA)** [6]:
- Long-run average forward PE: **~12.5x**, +1SD ~16x, +2SD ~21x, -1SD ~9x, -2SD ~6.5x.
- Latest (Jan-25): **~16.5x — trading at +1SD above its own long-run mean**.
- 2025CL PE of 15.3x sits **roughly +1SD above its 17-year average** [2][6].

**EV/EBITDA band history (Bloomberg, CLSA)** [7]:
- Long-run average: **7.2x**, +1SD 10x, -1SD 5.9x.
- Jan-25: **8.3x — about +0.6SD above the mean, but still below +1SD**.
- 2025CL EV/EBITDA of **6.5x** is actually **below the 17-year mean of 7.2x** [2], reflecting EBITDA reset under the new regulatory cycle.

> So on PE the stock looks rich vs its history; on EV/EBITDA (which strips capital-structure noise) it is closer to mid-cycle.

---

## 3. Forward earnings setup (CLSA model)

| | 2023A | 2024A | **2025CL** | 2026CL | 2027CL |
|---|---:|---:|---:|---:|---:|
| Revenue (RMm) | 53,067 | 56,737 | 63,041 | 65,800 | 68,707 |
| Net profit (RMm) | 2,771 | 4,697 | 5,197 | 5,294 | 5,211 |
| EPS (sen) | 48.7 | 82.6 | 91.4 | 93.1 | 91.6 |
| **CL/consensus (EPS %)** | – | – | **113** | **106** | **101** |
| **PE (x)** | 28.7 | 16.9 | **15.3** | 15.0 | 15.3 |
| **PB (x)** | 1.4 | 1.3 | **1.3** | 1.2 | 1.2 |
| **Div yield (%)** | 3.3 | 3.2 | **3.4** | 3.7 | 3.0 |
| **FCF yield (%)** | 31.7 | 17.0 | **17.0** | 16.0 | 18.0 |
| **ROE (%)** | 4.7 | 7.9 | **8.4** | 8.3 | 7.8 |
| Net debt/equity (%) | 69.9 | 60.4 | 59.0 | 56.2 | 51.0 |

Source: CLSA [2]. CLSA earnings sit **13% above consensus for 2025CL** and **6% above for 2026CL**, so the 15.3x CLSA PE would be closer to ~17x on consensus [2].

---

## 4. What justifies the premium

CLSA frames TNB as deserving an **above-average multiple** despite below-average ROE on the following pillars:

### a) Regulated, government-guaranteed return floor
- Tenaga earns a **7.3% net regulatory return on its regulated asset base** under the new Regulatory Period 4 (RP4, 2025-27) [5]. This anchors earnings visibility and is the principal source of multiple support.
- Power-sector reform and a **differentiated WACC for RP4** are explicitly cited by CLSA as the catalyst paving the way to monetise energy exports [5].

### b) Data-centre demand as the structural growth lever
- **Commercial-segment electricity demand grew +5.1% YoY in 1Q25**, cushioning a -5.5% YoY contraction in industrial volumes [3]. Data-centre load is the key driver.
- CLSA's channel checks point to **more contracts to cable companies for grid/transmission upgrades** in upcoming quarters, lifting regulated capex [3].
- **RM2.79bn regulated capex spent in 1Q25** (10.5% of the RM26.6bn approved base capex under RP4) and **RM16.3bn in contingent capex** sits as un-modelled upside for 2026-27 if demand accelerates [3].
- The DCF embeds **3% terminal growth** as a "fair reflection of higher electricity demand growth predominantly from data centre segment" [4]. This is the explicit re-rating justification baked into the RM17.60 TP.
- It also explains the **above-peer EPS growth profile** (10.6% FY1 vs peer median 1.9% [1]) that supports the higher PE.

### c) Improving balance sheet
- Net debt/equity has fallen from **96.8% (2022) → 60.4% (2024)** and CLSA models **51% by 2027** [2]. Gearing is **below the peer average of 93% and median of 77%** [1], removing balance-sheet risk premium.
- 4.1x EBITDA/interest cover in 2025CL provides headroom for a heavier capex cycle [2].

### d) DCF valuation derivation
TP of **RM17.60** is built from [4][8]:
- WACC **7.2%** (60% equity weight, 6.7% MRP, 4.2% Rf, beta **0.8**, cost of debt 3%)
- Terminal growth **3%**
- DCF 2025-2034 = RM43.66bn + terminal value RM93.93bn − net debt RM37.36bn = RM100.23bn equity value over 5,687m shares = RM17.60/share [8]
- A **low 0.8 beta** is a key driver — regulated revenue / low cyclicality earns the lower discount rate.

---

## 5. What weighs on the multiple (the discount lens)

- **ROE 8.4% is below peer average 11.5%** and well below DM utilities (DUK 9.6%, XEL 10.8%) and Malaysian gas peers (PTG 13.5%, GMB 26.5%) [1]. On a Gordon-growth / PB-ROE framework, TNB's PB of 1.3x is consistent with this lower ROE — i.e. there is **no PB premium**; the premium sits at the PE/EV-EBITDA level due to growth and capex cycle re-acceleration.
- **Dividend yield 3.4% is below the 3.7% peer median** [1] — TNB is not a yield story right now (payout dropped from 94% in 2023 to 52.5% in 2025CL as capex needs rise [2]).
- **Net D/E will remain elevated** vs DM peers in absolute terms (51% by 2027 vs ex-Duke/XEL averages skewed by their >150% gearing, but vs Asian utilities like PTG at -1.9% it is high) [1].
- **Investment risks** flagged by CLSA: (1) ICPT compensation delays from the government, (2) MYR depreciation on FX-borrowings (14% USD, 3% JPY, 6% GBP, 2% EUR, 2% AUD), (3) questionable acquisitions, (4) execution on RE/overseas targets [9].

---

## 6. Bottom-line read

> **TNB trades at a ~12-14% PE premium to its regional power-utility peer set, in line on PB, and at a slight discount on dividend yield. CLSA endorses the premium** because (i) RP4 locks in a 7.3% regulated return floor, (ii) data-centre demand drives the highest FY1 EPS growth in the peer set (10.6% vs median 1.9%), (iii) RM16.3bn contingent capex is unmodelled upside, (iv) gearing is improving toward 51% by 2027, and (v) the low-beta (0.8) regulated profile supports a 7.2% WACC in the DCF. The premium **is not** justified on returns (ROE below peers) or yield (payout cut to fund capex). It is a **growth + regulatory visibility re-rating, not a quality/yield re-rating** [1][3][4][5][8].

---
**Sources**
[1] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Peer/customer matrix (Figure on chunk 55) — 607960696LinqAlpha.PDF
[2] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Financials at a glance (chunk 10) — 607960696LinqAlpha.PDF
[3] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Commercial demand / capex commentary (chunk 9) — 607960696LinqAlpha.PDF
[4] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Valuation details / DCF inputs (chunk 52) — 607960696LinqAlpha.PDF
[5] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Investment thesis (chunk 50) — 607960696LinqAlpha.PDF
[6] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Forward PE band history (chunk 47) — 607960696LinqAlpha.PDF
[7] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — EV/EBITDA band history (chunk 43) — 607960696LinqAlpha.PDF
[8] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — DCF-derived TP table (chunk 49) — 607960696LinqAlpha.PDF
[9] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Investment risks (chunk 53) — 607960696LinqAlpha.PDF
[10] *Tenaga – O-PF (Fresh start)* — CLSA, 27 May 2025 — Cover page / TP RM17.60, +26% (chunk 2) — 607960696LinqAlpha.PDF

