Sell All Your Tenaga Nasional Berhad (TNB) Shares Because Their Business Model Sucks. Bad for Consumer, Bad for Investor. Simply Stupid.
Jun 5th, 2008 by AhYap
[Since AhYap.com is a weird blog, I choose to write about electricity while everyone is writing about petrol, haha.]
When I look at Tenaga Nasional Berhad (TNB) business model, I think it is a joke. However, many people including all those ‘experts’ in newspaper think that Tenaga Nasional is a very good stock because it has a monopoly on the electricity supply of Malaysia. All houses and businesses in Malaysia must pay TNB to get their electric, to watch Astro, refrigerate their watermelon and surf porn online. They also say it is a very good business because TNB income is very ’stable’ and so you can also expect to receive ’stable’ dividends.
But listen carefully, a monopoly business doesn’t mean it is a great business. And ’stable’ income doesn’t equal to ’stable’ dividends.
The biggest problem with TNB is that they simply control the price of their goods (electricity)! Even if their cost jump up a lot, they still can’t adjust their tariff (until yesterday). What is the meaning of monopoly when you can’t even control the price of your product! When you can’t control the selling price of your product but at the same time the cost of your product keep increasing, you will make less money or even lose money!
At this case, the monopoly end up hurting itself. What is benefit of your monopoly when you have to sell something fixed at RM100 while you produce it at RM150! And because you monopoly, you become compulsory to lose that RM50 no matter what. And the more customers you have, the more money you are compulsory to lose!
Do you think it is funny if your business look like that? Do you want to own such businesses? How do you expect to receive ’stable’ dividends when you have ’stable’ loses! Businesses can’t pay you good dividends when they are actually burning money, instead of generating money.
[The above examples are over-exaggerated by AhYap for Drama Effect, TNB is still able to cover their cost and make some money, but not a lot of money. They are also paying dividends, but not a lot of dividends. And with such business model, I don't think they can make good money and pay good dividends in the future even after the rate hike.]
It becomes more ridiculous when you realized that TNB runs on a business model that punish big customers! I don’t know what other businesses would do that and I really can’t accept that as an investor and a consumer. When you use less electricity, you pay lower tariff. The more you use, the higher the tariff would go! That would means if you buy 1 burger from McDonald, they charge you RM3, if you buy 2, they have to charge you RM10! WTF.
Businesses are meant to make money. Businesses like TNB is a ridiculous business because it didn’t reward their customers that use more! And end up investors don’t make much money from owning this stupid business.
It is almost guaranteed that if you spend more in a shop or buy more of a same products, the shop will happily give you discounts! That’s the correct way to do business, to motivate their customer to spend more so they can make more money. The customer is happy to get the discount and the business owner (and the investor) is happy to make more money. It is a win-win situation.
If you buy a box of Durex with 12 condoms in it, you expect each unit to cost less than the 3 condom pack! They motivate you to buy more (and fuck more), so you get more discount and enjoyment while they make more money. Same applies to Head and Shoulder shampoos, Whisper pads, Jack n Jill potato chips, Scottex toilet paper, Renoma underwear and almost everything else. The bigger pack you buy, the cheaper the averaged cost per unit.
If you go to popular restaurants like McDonald, KFC, PizzaHut, Starbucks, etc. All add ons are always cheaper than your initial purchase. McDonald sells 1 banana pie for RM2 and 2 pies for RM3! Starbucks large coffee is double the size of the small but cost only RM 2 extra! PizzaHut lets you add-on a salad bowl for only RM1 (normal price RM6) when you already order main course. [Damn it, suddenly I realized I eat a lot of junk food.]
Usually if you buy cloths over certain amount, say RM200, you will automatically get say 10% discounts. They are motivating you to spend more so they can make more money. Some shops will give you free gifts (actually sample/trial packs as bait to fish you for buying more in the future). Even if they don’t give you discount, they might give you a cool paper bag to wrap your goods instead of plastic bag so you look more cool when walking around the shopping complex.
Credit card companies motivate you to spend more by giving your bonus points to redeem for gifts! And they even motivate you to owe more money by offering you lower interest rate the more you owe them. So they can make more interest income from you. Even lousy companies like Malaysia Airlines (MAS) offer Enrich Miles to let their customers earn free flights. The more your fly, the more free flights you can redeem. And you got more Enrich Miles if you fly first class or business class (so they can charge you more on those seats). We also have Bonus Link card, Real Rewards card, Jusco Card and even Sen Heng card! The more you spend, the more gift/discounts you get.
Service industries motivate you to buy more by offering you bulk packages. Your averaged cost of signing up a 12 sessions slimming treatment at Terimee is cheaper than you sign up for 3. Your averaged cost of signing up a life time membership with California Fitness is cheaper than a 1 year membership. Even the QQ Express Cut at Mid Valley gives me a stamping cut that gives me 1 free cut for every 6 cut, so you earn an extra idiot look hair cut after they make you look like a sohai for 6 times! Many food restaurants like Coffee Bean are giving away loyalty cards that earn 1 stamp for each visit. And you can redeem free drinks/food after certain amount of visits.
It is very clear that businesses should always reward customers that spend more and customers that are loyal. But what does TNB do? They punish them! The more electric you use, the more expensive you need to pay. This is stupid.
I understand the reason behind this ‘ridiculous’ tariff structure is because the government wants us to spend less on electricity to save on energy. If that is the case, TNB can be considered as a good government entity or an environment friendly company BUT DEFINITELY not a good business/investment.
As a consumer, I want cheaper goods if I spend more. As an investor, I want a company that will motivate their customers to spend more so it can make more money for me. Thus, as a consumer and an investor, I think TNB-sucks-damn-a-lot.
There are many perspectives to look at businesses and this is one of the very rare one. I don’t expect you to read it in newspaper. I end my post with our new electricity tariff for you to enjoy.
| Home Use （Monthly Usage < 400kWh） | |
| kWh | Tariff (cent) |
| 1-200 | 21.80 |
| 200-400 | 34.50 |
| Home Use （Monthly Usage > 400kWh） | |
| kWh | Tariff （cent） |
| 1-500 | 30.00 |
| 501-600 | 39.00 |
| 601-700 | 40.00 |
| 701-800 | 41.00 |
| 801-900 | 43.00 |
| >901 | 46.00 |
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Okay, this is not the best post I read from you. TNB sucks for consumer, but is it really bad for the investors (just because of the biz model)… I can’t be sure.
1. The business model doesn’t seem like that bad to me.
2. Looking bad, we can see that TNB are ALWAYS ready to transfer the cost to the consumer.
Sure the business model looks awful when it compares to other industry like fast food and fashion; but by offering such price scheme actually makes TNB to earn more money. As you said, electricity power is a compulsary – do you skip using aircon when you see your power meter hit 901KW? do big factories stop production when the power meter hit 900MW?
Absolutely not.
Majority of the consumers (both home and industrial) will just suck up the extra power cost and keep using the same amount of power.
To add more, most illegal and legal factories chou sau kiok (Do hand leg) to their electricity meters. Some big factories pays about RM 50 for a 30,000 sq ft plastic factory with full machinery running at full steam.
When the TNB personnel comes they bribe them with approximately RM 300 to 500, to shares with the TNB tailo and sailo.
The actual price would amount in 3k to 4k a month so savings for the tauke about RM 3,500 on electricity.
The best business is actually the still the prostituition business as this business has been proven its effectiveness in generating money in human civilisation.
For example the SPA business in Klang Valley (after long conversation with the staff a.k.a pimp) The spa business is operated by a single boss with 5 outlets namely, Armada, BB, Summit, Crown, Sunway.
Now the price for one session with the girl is about RM 238.00 with massage approximately 1 hour.
One day is about on average 40 customers per outlet and 70 during weekends.
Sales : –
(70 x 2) + (40 x 5) x RM 238.00 x 5 outlets x 4 weeks
= RM 1,618,400.00
Expenses
Rental: 10,000. Per outlet x 5 = RM 50,000.00
Girls = RM 100.00 x 110 sales per week x 4 = RM 44,000.00 (assuming the girls can tahan that hammering)
Electricity : RM 500.00 TNB sohai
Water : RM 300.00 for showers and steam
Waiters : 7 person x 5 outlet x salary RM 1500.00 = RM 52,500.00
Pimps : 5 persons RM 2000.00 salary x 5 outlet = RM RM 50,000.00
Police bribe : RM 10,000.00 x 5 outlets. = RM 50,000.00
Banking expenses (Terminal and Services) = 1.5% of sales RM 24,276.00
Food and Beverage : RM 20,000.00 per outlet x 5 = RM 100,000.00
Miscellaneous Expenses RM 10,000.00
Condom expenses = 110 session x 4 weeks x RM 3.50 durex = RM 1,540.00
Total Sales RM 1,618,400.00 less Expenses RM 383,116.00
Net profit no tax because illegal = RM 1,235,284.00 x 12 months = RM 14,823,408.00
NOW THAT’S A BUSINESS MODEL !!
I agree with Soufulow.Ah Yap has stopped from blogging for too long.He has to warm up a bit.TNB is not that bad for investors who want stable and safe return.They just have to accept low dividend yield.Government will always protect TNB.In addition,TNB has a dividend policy.If you look at the major shareholders in TNB,you will see most mutual funds are there.TNB is said to be a MUST HAVE stock in any mutual funds’ portfolio because it provides safety element.The next reason could be all mutual funds are required to do ‘national service’ by owning TNB.From what I know,all banks in Malaysia are required to do ‘national service’ to government linked companies such as TNB,Telekom,TIME,Celcom and more.Electricity is also a national security issue.So,the government will help TNB ‘by hook or crook’ even to the extend of marginalising Independent Power Producers (IPP).
In fact,when Tenaga share price was at RM 9.30 in December 2007,Amanah Saham Bumiputera had been buying a lot of TNB’s shares.I noticed this and posted a blog about it.Anyone who understood my hind and bought TNB when it was at RM 6 will be laughing all the way to the bank today.Yesterday,I have posted on what to do during inflationary period.Please read and comment about it.
TNB stock does not seem that bad in KLSE, there are a lot more counters worser than TNB (look at those with the PN17 code in thestar newspaper business column). Since the government hold a substantial stake in this company, they will always make sure that TNB perform well (or at least moderately) in terms of profit and share prices. When TNB start to lose money or start to make less money, the will increase the electricity tariff.
Just look TNB share today (6th June 08), it shot up RM 1.70 to RM 9.00 from RM 7.30 closing price two days ago (the counter suspended yesterday). Almost 24% up and you will laughing now if you purchase any of their share within last 2-4 weeks.
TO malaysianpeople,
It seem like your calculation (on the SPA business) for the working girls are wrong. Based on your calculation, there are total of :
(70 x 2) + (40 x 5) = 340 customers per week per outlet
This mean you have a total of 340 x 4 x 5 = 6800 customers visits per month for the 5 outlets business. If the girls are paid RM 100 per customer (from the RM 238 one session), this mean the boss have to fork out RM 100 x 6800 = RM 680,000 for the girls and not RM 44,000 only (unless the working girls are slaves forced to work with very low wages). The condoms will also count as 6800 x RM 3.50 = RM 23,800 (not RM 1,540). Sometimes they also need to rent rooms from the attached hotel to serve the customers, let say RM 70 per room x 4 rooms x 7 days x 4 weeks x 5 outlets = RM 39,200.
So the total cost will be around RM 1,080,626. This mean the business only made around RM 600k+ if no other cost involved.
Stop blogging for long time doesnt mean his brain stops lar… keke~
Ah Yap, enjoying the “attack” that comes to you?
@ Soufulow and others,
This is both an investing post and also a joke post.
“Dare to be different!” is what AhYap and AhYap.com is all about. 9 out of 10 things in my brain are different than others, making me ‘weird’ and my posts ‘interesting’.
AhYap,
I am really wondering, if you wrote out the name of the company, will someone (or perhaps the owner) sue you for slander?
I wish to be like you, dare to post whatever you like. Wondering where is your blog hosted as well, Malaysia? And, I was trying to study the cyber law of Malaysia. Sometimes it is kinda fun when you can break the law legally, now that is what I call the weakness of the law, just like Frank William Abagnale Jr who conned $2.5 million for 5 years in the 1960s. Watch the movie, “Catch Me If You Can”.
Regards,
SilentDog.
@SilentDog, I don’t think Tenaga Nasional will want to sue me since it is just a company/stock review. But I think Hishammuddin and Telekom Malaysia might want to. LOL.
Well even if total cost is that much, i just wanna prove that investing in other stocks is definitely better than TNB.
Multiracial business is chicken business. In the SPA all Chinese indian and Malays are very good friends the ultimate goal is enjoyment.
Wheter TOKBI likes it or not that is the truth.
Multiracial is alive and kicking in the SPA and the best generating business.
hey ah yap,
Want to ask u. since u hate streamyx so much but Tan Teng Boo stated that TM is a good buy. What is your opinion? At the same time boy boy cute( i should post this in your blog actually), u are holding timecom shares now, currently timecom shares is trading at a very low price. Do you plan to sell your shares to cut losses? or are u going to buy more since it is at a lower price? or u choose to just hold it and dont buy?
ahbi,
I used to own Timecom as well, but after cutting losses, i don’t dare to stock up anymore. I have read their annual report before. This company is totally suck! They are in the red line for few years already. Getting Digi to work with them might stir up the company a bit, but long term i don’t see this company will be performing. Their main business is broadband service provider and also public phone booth (wonder who will use since most people own HP now days, this haven’t include the vandalism to phone booth). So overall, i don’t think it is a good buy. But well, everyone view is different, that is why there is buyer and seller in each counter at KLSE.
Hi there, came here by chance.
Great blog.
TNB is not a great stock to invest in. It carries a social burden and every tariff review has to be approved by the authority and it is forced to buy electricity produced by IPP. A true business entity should adjust the pricing structure freely, just like what F&N, Amway, Nestle, and others are doing. Also, it should have the freedom in negotiating the rate with IPP.
TNB has big amount of debt too. It should have settled it and not using the borrowed money to pay dividend.
In fact, TNB should not be listed in the first place. It does not need shareholders’ money to operate.
To ahbi,
Timecom is very cheap compared to its asset value.If you track my portfolio,i will always hold stocks until the price matches its value.Safety margin is wide for TIMECOM around 50%,so nothing to fear.Manage your financial well and you will be able to cope with your fear.
Hi, i think perhaps you’re getting it all wrong why TNB charge more if you use more. I believe its not exactly a business thingie but more of an environment thingie. They are actually trying to make people use less electricity.Perhaps less aircond and all but i think it’s not exactly working. But in a business kind of way, they are earning all right.As a consumer you can’t choose which provider but u can choose to use more or less. So if you need alot of electricity, it doesn’t matter whether u get discount anot, coz you still have to pay. So as a provider why give discount when u still get paid? That is IMO why monopoly is so powerful.
Monopoly power simply means I’m taiko of whatever and i can set my price at whatever rate and you still have to suck it up.Which doesn’t make sense to have discount since people won’t stop using electricity.
TNB generate electricity as a consumer product, so it doesn’t mean giving discount at using higher rate will encourage people to use more electricity, like paranoid aunty won’t let her computer on overnight cause she say got radiation =.=
Also, even IF it does encourage people to use more electricity, cost of discount might be more than revenue of sales.
Regarding this is a joke post, then all my points above won’t matter lo! hahahhaa!
Yeah, its true, tnb just like to cut my eletricity, memang takde keje lain suke potong karen orang saja, dahlaa tarif b**ngan mahal nak m**pus, correct ahyap, till now they like to cut my power line lol!!!
Aiyo… Mr. Yap… if it’s really like what u said at the begining aahh… the more u use electric ahh.. the more they will lose… then for sure that their business module is the more u use… the more u have to pay liao loh… o(∩_∩)o…
TTB is buying airasia , PIE, any new stocks in additions to that
the problem is, most that you mentioned have competitors or items/services that ppl do not need. TNB has no competitors, it’s a product that you need. the more you want it, the more they ask you to pay. malaysia so hot, you dont want to use fan or aircon meh? you still need mah. the only problem is the fixed selling price. if not for that, i think TNB make even more money, but then again, everyone in malaysia will riot.
Sometime their charges quite wired.. My electricity bill always stay at the amount of RM40 (actual RM39.70).. This time when I received is about RM70++…What happen ?
hey ah yap, you are detained under ISA already isit? no more posting???
News: Tenaga swings into RM282.9m net loss in Q4
Some people don’t get what I try to say. There are monopolies that make you money (Coca Cola – Soft Drink, Mcdonald – Fast Food, etc) because you can control the selling price. There are monopolies that eat your money when you can’t control your selling price EVEN if you cost of goods is higher than your selling price! i.e. Tenaga Nasional! Not only TNB cannot decide on its selling price while its cost is rising so much but they also cannot stop selling! The monopoly become ‘compulsory’. Compulsory of what? Compulsory of losing money even they know it. Compulsory of selling cheaper than their cost even they know it. Some point up that TNB has ’social responsibilities’ and thus cannot simply adjust the selling price. That is exactly true and that’s why as an investor, why would you like to own this stock? Are you telling me that’s because you are trying to be patriotic? Investor invests for money. Buy companies that put your money to work and give you more money, not companies that gives money away because of ’social responsibilities’.
Excelent blog – but is it common to use american english in Malaysia? – i thought they teach us english english at school?
hello, just wondering..
i have a friend who works in senheng, according to him the Senheng PlusOne card mainly three functions:
- point redemption
- member price
- warranty
this “member price” is the reccomended retail price given by supplier (e.g. Sony, Samsung) and is unit cost + commission, and there is no “buy more, get more points”. it’s all fixed price and fixed points (of course, if more expensive items, get more points. but if buy more of the same products, the points will still be same per unit).
there is no “buy more, get discount” concept… actually i think it’s good because if buy outside you still get same thing at same price at senheng/other shops with the points system, and yet you can redeem for other goods…
but still all this is good business methods, people also cari makan to earn for living. at least they don’t practice like the 4 indian batshit conmen can edi.
I adopted solar lighting last year and save some of my Tenaga bills. You guy should check out http://www.scorigin.com
Their solar spotlight and floodlight is great and service is good too.
We just need to be independant on our energy needs and that why I go solar power.
~It becomes more ridiculous when you realized that TNB runs on a business model that punish big customers~
I dunt agree with this comment… TNB does charge more on companies who use higher power .. TNB basically charge on total consumption (KWhr) and max demand (KVA)… usually big customers means the ppl who hv high max demand.. when they hv high max demand TNB needs to invest more on higher rated equipments to provide it. So its only logical for TNB to charge them more..
If u were providing power to 10 companies at max demand of 10 kw, suddenly a company comes in and uses a max demand of 12 kw… Being a GLC u hv the responsibility to provided it to him.. so u invest money on equiptments for him and provided it to him and u dunt charge him extra. Now thats a bad business model lolx.
You might argue that its an investment and there is a chance of making money from this company in the long term. But wat if more companies come in and ask for 14 ,18, or 20 Kw of max demand. Gulung tikar la then and say bye bye to gas resources also lolx. Indirectly TNB is making companies reduce their max demand, power consumption rates (KWhr) does reduce as usage increases but max demand(KVA) usage is vice versa.
TNB is a GLC … so u dun need to argue on why the tariff like that ..
why bus’model is like that .. n comparing tnb with coke .. mcD …
is not reasonable … they are not in d same game …
its like comparing UITM n LIMKOKWING …
it was originally form to help government and malaysian … main goals is not profit making … dulu is LLN before that is CEB …
its a CI link stock .. so .. no need to say its bad … if its bad ..
ASB woudnt even look at it …
dun make comments just by reading annual report … it makes u look very “GOOD” .. agahahahaaa .. :p
if stock valuation is as easy as reading annual report …
then there is no need for CFA n so on … auntie uncle also can read annual report …
only an opinion … after all im just a kid …
There are many reasons why TNB tariff is structured that way, and both of them have been mentioned. TNB has no control on its tariff, as each proposal needs to be approved by the government. In other words, the Energy Ministry sets at what price TNB can sell their products, not TNB itself.
To reiterate:
1. The primary reason the government sets the structure to “the more you use, the more you pay” is for energy conservation. We don’t have nuclear power plants in Malaysia. We are burning fossil fuels which are in limited supply. The more of these fossil fuels we use, the less we have in stock. The less we have in stock, the higher the price. If we use too much, then we may not be able to sell and export these fuels at all and our country stands to lose profits especially from oil. Having this kind of policy helps promote energy efficiency, whereby if you use energy efficient equipment, your consumption is lessened but are still able to use more appliances.
2. Tariff for industries – if you have a big factory that has big machines that require for eg, 10 MW demand, then TNB has to install all the equipment that can supply 10MW demand. Then suddenly you wish to upgrade your factory and install more machines reaching up to 12 MW demand. TNB then has to dismantle and install new electrical towers, new switchgears, new transformers, new power lines, new protection relays, new joints, new terminations, new insulators, and so on so that 12 MW can flow through their power line. So you must pay more to have all these equipments installed. Today, you don’t have to worry about all these equipment because TNB will prepare the entire system for you to your meter. TNB thus try to recover their investment in all their equipment from the higher earnings through their tariff structure. It is not as simple as a production line at a factory, whereby if you upgrade your equipment and make 1000 boxes an hour instead of 800 an hour, if the main customer cancels a big order you can always stock your product or sell to another customer. With electricity, firstly you can’t store electricity you produce. Secondly and most importantly, if TNB installed power lines and towers for your factory, they exist only for your factory. They can’t simply move these towers and power lines to another factory when you decide not to use their power supply for a day or two.
Therefore, I very much agree with Ah Yap that TNB is not worth investing in. As long as TNB remains a monopoly, do not invest in TNB, for reasons as Ah Yap mentioned and will be repeated by me : As long as TNB is a monopoly, they can’t control the price of their product. Once TNB ceases to be a monopoly, it will then be very attractive as TNB will be able to structure their sales quantity to take control of their business.
But still, RM 3 for a burger is for low income earner… they deserve electricity too.
I like your blog.
Dear all,
Any tariff revision are subjected to prior approval of Ministry.Tnb has got no power and right to simply increase the electricity rates.By accusing TNB as blood sucker is not fair and I would like to advise those involved in this blog to be more professional and with the spirits of love malaysians.
Yours faithfully
Kunta Kinte
Believe in living together.