FY25 Outperformance: Core Net Profit (CNP) of RM4.44bn (+18% YoY) beat estimates by 12%, driven by robust electricity sales and a lower effective tax rate (ETR) of 22.8%. Total DPS of 53.0 sen (65.6% payout ratio) exceeding management’s 30–60% dividend policy range.
Tax Resolution: Settled RM10.5bn in historical tax disputes (YA 2003–2024), de-risking the balance sheet. Future ETR is anchored at ~24% (vs. 30% prior) via the new Schedule 7B Investment Allowance (IA).
Looking ahead: We expect sustained growth to be supported by a higher Regulated Asset Base (RAB) expanding toward RM75.4bn under the RP4 framework, a 10GW power generation project pipeline, and improved cash flow predictability from the Monthly Automatic Fuel Adjustment (AFA) mechanism.
Earnings & Valuation: FY26–27 earnings forecasts raised by 8.8–9.1%; introduced FY28 CNP target of RM5.25bn. Maintain BUY with a revised Target Price of RM16.77 (from RM15.77).
Exceeded Expectations.TENAGA’s FY25 core net profit (CNP) of RM4.44bn firmly surpassed our estimates (112%) but matching consensus expectations (98%). The outperformance was primarily driven by a lower-than-anticipated effective tax rate of 22.8% (vs. Management's 30.0% estimate), following the resolution of the long-standing tax dispute. The favorable variance was largely due to the utilization of the newly approved Investment Allowance (IA) under Schedule 7B, which effectively cushioned the impact from the cessation of reinvestment allowances (RA) during the year.
Higher Dividends Declared. The Group declared a final dividend of 28.0sen in 4QFY25 (4QFY24: 26.0sen), bringing FY25 DPS to 53.0sen (FY24: 51.0sen).
YoY. Excluding EIs such as forex gains (RM318.0m), impairment losses on intangibles (RM166.8m), impairment losses on PPE (RM117.8m), and other adjustments, 4QFY25 CNP surged 96.7% yoy to RM1379.5m. This robust expansion was underpinned by a 22.4% increase in revenue to RM17.6bn, driven by higher electricity sales and the commencement of the Regulatory Period 4 (RP4) framework. The bottom line was further bolstered by a 57.8% jump in other operating income to RM573.3m and improved joint venture contributions (+22.5% yoy). Notably, the share of results from associates saw a significant turnaround, recording a profit of RM29.5m compared to a loss of RM202.2m in 4QFY24. This reversal was largely attributed to the absence of the one-off hyperinflationary accounting adjustments in Türkiye that heavily impacted prior-year earnings. Finally, profitability was significantly enhanced by a substantially lower effective tax rate of 22.8%, following the successful resolution of the tax dispute and the subsequent utilization of Investment Allowance (IA) claims under Schedule 7B. Consequently, the CNP margin improved 3.9 ppts to 8.3% yoy.
YTD. For the full year, FY25 CNP rose 18.1% yoy to RM4.4bn underpinned by a robust 19.4% surge in revenue to RM67.7bn primarily driven by increased electricity sales. Profitability was further bolstered by a 15.5% increase in other operating income to RM1.2bn and a 2.5% reduction in finance costs following strategic debt management. A standout feature was the significant turnaround in the generation business (Genco), which posted a PAT of RM421.4m (FY24: RM178.9m). This expansion was achieved through optimized fuel management and a marked reduction in negative fuel margins, effectively replacing the high base effect of the prior year which had been supported by a one-off RM163.0m Liquidated Ascertained Damages (LAD) claim at Southern Power Generation.
QoQ. Core net profit (CNP) jumped 18.5% to RM1,379.5m, supported by a significant 126.2% surge in other operating income to RM573.3m. This spike was primarily driven by the recovery of insurance claims for Genco subsidiaries, which effectively recognized compensation for previous operational interruptions —a tailwind management expects to continue into FY26. The Group’s performance was further bolstered by a robust sequential turnaround in its joint ventures and associates, which saw their share of results grow by 113.7% and 298.6% respectively. Profitability was also enhanced by a lower effective tax rate, resulting from the previously mentioned Investment Allowance (IA) claims under Schedule 7B and a favourable movement in deferred tax provisions tied to the net reversal of impairment on financial instruments (doubtful debt).
Electricity Demand Growth Driven by Domestic Sector and Data Centre. In 4QFY25, electricity demand grew by 4.6% yoy, primarily fueled by a 16.5% surge in the Commercial sector. This robust growth is largely attributed to the structural shift from data center expansions, which are categorized within this segment. Additionally, the "Others" sector recorded a significant 176.4% increase, supported by higher consumption from water and sewage operators, agriculture, public lighting, and mining activities. On a full-year basis, FY25 demand growth reached 2.3% yoy, trailing Malaysia’s 5.2% GDP growth due to a 7.3% contraction in the Industrial segment. This industrial sluggishness was mainly caused by reduced demand within the iron, steel, and utility electrical sectors.
Briefing Takeaways. Management expects to accelerate capital deployment in FY26, guiding for a total CAPEX of RM18.0 bil—comprising RM13.0 bil in regulated spending (RM9.3 bil base; RM3.7 bil contingent) and RM5.0 bil for non-regulated growth—with an overall utilization target of 80–85% of the RM42.82 bil RP4 framework. Domestic momentum is headlined by the secured data centre pipeline reaching ~7.5GW of maximum demand, alongside a strategic pivot toward high-value GPU-based AI facilities and the receipt of Letters of Notification (LON) for 1,262MW of gas plant extensions. Internationally, the focus remains on scaling the renewable energy portfolio, particularly in the resilient Australian market, while the CRESS framework and the Malaysia-Singapore interconnection (COD 2029–2030) reinforce leadership in the ASEAN Power Grid. Operational efficiency remains a core strength, evidenced by an improved Energy Availability Factor (EAF) of 87.8% (up from 84.3% in 2024) and world-class reliability with SAIDI at 46.93 minutes, supporting a finalized FY25 dividend of 53.0 sen—representing a 65.6% payout ratio that sits comfortably above the 30–60% policy benchmark.
Outlook. Looking ahead, we expect sustained sequential growth as the Regulated Asset Base (RAB) expands toward RM75.8bn, underpinned by the RM42.82bn RP4 CAPEX framework to support the National Energy Transition Roadmap (NETR). Earnings will be further optimized by the Schedule 7B Investment Allowance, which is expected to lower the effective tax rate to ~24%, while the Automatic Fuel Adjustment (AFA) mechanism enhances predictability by improving immediate fuel cost recovery and overall working capital. Non-regulated growth is anchored by strategic regional interconnections and leadership in the ASEAN Power Grid (APG), establishing high-margin wheeling charges through initiatives like ENEGEM and the Tripartite Energy Wheeling Agreement. With a robust 10GW generation pipeline and ~7.5GW of secured data centre demand, Tenaga remains the primary beneficiary of Malaysia’s structural energy transition and the regional digital infrastructure boom.
Earnings Revision. Post-analyst briefing, we have revised our FY26 and FY27 earnings forecasts upward by 8.8% and 9.1% respectively. These upgrades are primarily driven by the resolution of long-standing RIA tax disputes (YA 2003–2024), which has effectively cleared the balance sheet of historical tax overhangs and eliminated the need for further provisions. Moving forward, the Group’s effective tax rate is expected to structurally improve following the approval of the Schedule 7B Investment Allowance (IA). Management has provided new guidance of approximately 24% for future years, a significant reduction from the prior 30% benchmark. While specific incentive figures remain confidential, the allowance is tied to historical CAPEX claims up to approved limits; consequently, we have adjusted our tax assumptions to 24% for FY26 onwards to reflect this improved long-term outlook. We also introduce our FY28 earnings forecast of RM5.25bn, underpinned by the expanding Regulated Asset Base and optimized tax efficiency.
Valuation and Recommendation. We maintain our BUY rating with a revised Target Price of RM16.77 (from RM15.77). This valuation adjustment incorporates the structural uplift in earnings visibility from the Schedule 7B Investment Allowance—which anchors the long-term effective tax rate at ~24%. Tenaga remains the primary beneficiary of Malaysia's energy transition, supported by a secured 7.5GW data centre pipeline and strategic leadership in the ASEAN Power Grid.
Risk. Rapid plunge in coal prices, unplanned shutdowns of power plants, weakening of Ringgit, policy risk.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.878434 | 3.909825 |
| EUR | 4.590523 | 4.595422 |
| CNY | 0.567561 | 0.568180 |
| HKD | 0.495911 | 0.499417 |
| SGD | 3.065484 | 3.087199 |