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PP 7767/09/2010(025354)

Malaysia Corporate Highlights


RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
20 August 2010
MARKET DATELINE

YTL Power Share Price


Fair Value
:
:
RM2.29
RM2.20
Ending On A Strong Note Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (YTLPOWR; Code: 6742) Bloomberg: YTLP MK


Net Basic FD FD EPS FD Net
FYE Turnover Profit EPS# EPS# Growth PER C.EPS* P/NTA gearing ROE GDY
Jun (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2010a 13,442.9 1,211.9 17.2 16.1 39.9 14.2 - 1.8 1.9 18.2 7.6
2011f 14,520.9 1,251.8 17.8 16.6 3.3 13.8 16.9 1.8 1.8 17.0 7.6
2012f 14,925.6 1,293.3 18.3 17.2 3.3 13.3 17.6 1.7 1.8 16.7 7.6
2013f 15,288.2 1,339.0 19.0 17.8 3.5 12.9 19.5 1.6 0.0 16.2 7.6
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC # Excl. EI * Consensus Based On IBES Estimates

RHBRI Vs. Consensus


♦ 4Q ahead of expectations. YTLP’s 4QFY10 results came in above our and Above
consensus expectations with full-year net profit of RM1,212m (+32% yoy, In Line
based on core profits) accounting for around 106.5-107% of our and
Below
consensus full-year estimates. The key variance was a “below-the-line”
item, i.e. lower-than-expected interest expense. Issued Capital (m shares) 7,248.7
Market Cap (RMm) 16,599.6
♦ PowerSeraya helps sustain 4Q numbers. QoQ, revenue rose 12% Daily Trading Vol (m shs) 4.3
mainly due to stronger contribution from PowerSeraya (+12.8% qoq) as
52wk Price Range (RM) 2.10 - 2.31
well as seasonally stronger topline from Wessex (+19.1% qoq, partly
Major Shareholders: (%)
offset by a stronger RM). Net profit, however, surged 42% qoq led by
stronger contribution from both power (+42% qoq) and Wessex (+48% YTL Corporation 55.5
qoq, possibly due to better operational efficiencies), partly offset by a EPF 10.0
higher effective tax rate of 31.7% (3Q10: 25.1%).

♦ Declares 4th interim single tier DPS of 1.875 sen. Despite the stronger
FYE Jun
EPS chg (%)
FY11
6.4
FY12
6.4
FY13
New
set of results, YTLP kept its 4th interim single tier DPS at a similar level to
Var to Cons (%) 4.8 4.0 (2.4)
4Q09, i.e. 1.88 sen. This was only half of our expectated TE DPS of 3.75
sen and potentially, could reflect a more conservative stand on dividends
PE Band Chart
in light of the capex required for its WiMAX rollout (see below). YTD, total
net DPS was 13.1 sen (FY09: 13.1 sen TE), which translates to a net yield
PER = 16x
of 5.7%. PER = 13x
PER = 10x
♦ Focus expected to turn to WiMAX rollout in 4QCY10. We think the
market would be watching the group’s WiMAX development and strategy
closely, although not much details are known at this juncture. Recall, YTL
Communications (YTLC) plans to invest RM2.5bn over five years to roll out
its network. A potential concern here is that YTLC could decide to opt for
an aggressive price strategy in order to win subscribers, especially given
that it would be coming into the market with a largely unutilised Relative Performance To FBM KLCI
nationwide network.

♦ Risks. The risks include: 1) unfavourable forex movements, which will FBM KLCI
adversely affect the translation of foreign earnings; 2) potential change in
competitive landscape under the National Energy Plan; and 3) execution
risk and poor subscriber numbers for WiMAX.
YTL Power

♦ Forecasts. We have raised our FY11-12 net profit forecasts by 6.4% p.a.
mainly after we lowered our interest expense projections by around 23%
p.a.. Despite the upward revision to our earnings forecasts, we have
lowered our FY11-12 net DPS projections to 13.1 sen p.a. from 15 sen p.a.
We introduced our FY13 numbers.

♦ Investment case. Our SOP-derived fair value has been raised slightly to
RM2.20 from RM2.15 after an update for the full-year results. Market David Chong, CFA
Perform call, however, is unchanged. (603) 9280 2186
david.chong@rhb.com.my

Please read important disclosures at the end of this report. Page 1 of 3

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20 August 2010

Table 2 : Earnings Review


QoQ YoY YoY
FYE Jun (RMm) 4Q09 3Q10 4Q10 (%) (%) FY09 FY10 (%) Comments
Power Generation 2,114 2,778 3,080 11 46 3,412 10,878 >100 Full-year higher yoy mainly due to
contribution from PowerSeraya (FY09: Four
months contribution). QoQ improvement
mainly from PowerSeraya.
Water & Sewerage 711 543 646 19 (9) 2,511 2,456 (2) Weaker yoy due to stronger RM (+13.6%
vs. GBP). QoQ higher mainly due to
seasonality, despite RM appreciating
against GBP by 8.6%.
Investment Holding 21 30 27 (11) 32 180 109 (40)
Revenue 2,837 3,351 3,753 12 32 6,093 13,443 >100

Operating profit 556 552 744 35 34 1,869 2,304 23


Interest expense (240) (199) (181) (9) (24) (877) (836) (5) Total debt slightly higher qoq at around
RM21.2bn as at end-4QFY10 (vs. 3QFY10:
RM20.5bn; 4QFY09: RM22.9bn).
Associates 57 49 65 32 14 225 227 0
Exceptionals 170 0 0 nm (100) 207 0 (100) 4Q09 EI relates to writeback of fuel oil
provision.
Pre-tax profit 544 403 628 56 15 1,424 1,694 19 FY10 stronger yoy due to: 1) consolidation
of PowerSeraya; and 2) impact of windfall
tax provision in 1QFY09, partly offset by
higher losses from the investment holding
and other business segment (RM54m loss
vs. RM99m profit in FY09).
Tax (514) (101) (199) 97 (61) (740) (482) (35) 4Q09 and FY09 impacted by RM442.5m
deferred tax charged incurred by Wessex.
Effec tax rate (%) 94.5 25.1 31.7 52.0 28.5
Minority interest (0) 0 0 nm (100) (0) (0) >100
Net profit 30 302 429 42 >100 683 1,212 77
Core net profit 302 302 429 42 42 919 1,212 32 After stripping out EI and deferred tax
charge for FY09.
Source: Company, RHBRI

Table 3 : Sum Of Parts


RMm RM/share
Domestic power DCF 1,793.7 0.21 DCF at WACC of 6%
PT Jawa Power DCF 3,645.9 0.42 35% share of DCF at WACC of 6%
Wessex Water 15,655.8 1.80 1.1x P/RCV plus 10% quality premium
PowerSeraya 8,676.0 1.00 Cost of investment
Other 1,692.2 0.19 Investments and other assets at book value
Total 31,463.5 3.61
Less: Net debt (12,355.8) (1.42) Inclusive of cash from warrant conversion
Net NPV 19,107.7 2.20
Source: RHBRI estimates

Page 2 of 3

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20 August 2010

Table 4 : Earnings Forecasts Table 5 : Forecast Assumptions


FYE Jun (RMm) FY10a FY11F FY12F FY13F FYE Jun FY11F FY12F FY13F
Power 10,878.5 11,699.5 12,024.9 12,305.9 Power installed capacity (MW)
Water 2,455.9 2,641.4 2,720.7 2,802.3 Paka 808 808 808
Investment Holding 108.6 180.0 180.0 180.0 Pasir Gudang 404 404 404
Turnover 13,442.9 14,520.9 14,925.6 15,288.2 PT Jawa (35%-owned) 1,220 1,220 1,220
230.5 8.0 2.8 2.4 PowerSeraya 3,100 3,100 3,100
EBITDA 2,932.3 2,999.2 3,089.6 3,188.0
Margin (%) 21.8 20.7 20.7 20.9 Wessex Water
Dep & Amort (804.6) (806.8) (831.1) (855.3) Revenue growth (%) 3.0 3.0 3.0
Operating profit 2,127.7 2,192.4 2,258.5 2,332.7 EBITDA margin (%) 62.4 61.2 60.0
Other income 124.3 75.0 65.0 50.0 Source: Company data, RHBRI estimates
Interest income 51.8 51.8 51.8 54.4
Interest expense (836.3) (847.3) (847.3) (847.3)
Associates 226.5 219.6 219.6 219.6
Exceptionals 0.0 0.0 0.0 0.0
Pre-tax profit 1,694.0 1,691.6 1,747.7 1,809.5
Tax (482.0) (439.8) (454.4) (470.5)
Minority interest (0.1) 0.0 0.0 0.0
Net profit 1,211.9 1,251.8 1,293.3 1,339.0
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
(previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and
information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to
opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an
offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever
and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time
have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy
will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans
of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher
risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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