Tenaga's Forex Losses

Posted last night: Tenaga may post RM1b quarterly loss

Received the following set of comments..

Jasonred79 said...
Let's look at it "profit from BUSINESS ACTIVITIES" perspective.

In 2007, Tenaga made RM1.5b ... partially due to a 242million gain on forex. (so that's 1.25 billion profit from biz)

In 2008, Tenaga lost 944 million, due to 1.44b loss on forex. Discounting that, they only made RM 500 million profit based on their business.

At the end of August 2008, Tenaga's US dollar-denominated debt amounted to 6.29 billion ringgit, while its Japanese yen-denominated debt was 4.5 billion ringgit.

There you go... basically, Tenaga's balance sheet get's whacked pretty badly whenever the RM slides against the USD and Yen. ... actually, Tenaga must be morons for borrowing in currencies which tend to strengthen... imagine if tenaga had borrowed in Zimbabwe money! Hahaha! By now, their debt would have shrunk to peanuts!

...

Personally, I don't like to look too much into forex gains and losses, since forex gain and loss can reverse anytime. Furthermore, from the perspective of an international investor, Even though tenaga's debt in RM terms has ballooned, it's debt in USD terms is pretty constant.

However, even discounting forex, it looks like profit slid from 1250 million to 500 million. How Tenaga managed that, considering the 27% jump in revenue, I DON'T KNOW.

=>>>>
Jason,

Let me share my flawed one sen view with you.

As mentioned before to you, I believe so much that one should always remember that what one's owe the bankers currently is based at current rates and if the borrowing is made on foreign currencies, what one OWES is based on the current exchange rates.

Think about it.

That's how I always view it.

Forex losses and gains are part of the existing economics of the particular business that indulges in foreign denominated fundings. And what one OWES is based on what the current forex rates.

For Tenaga case, one could argue last time, the positives about borrowing in Yen for it was a rather 'cheap' currency for one fundings needs. No one expected Yen to soar against the ringgit but it has.

Tenaga a fundamental stock?

Perhaps a fundamentally flawed stock if you ask me.

Of course I am always flawed.