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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

YTL Power Share Price

Fair Value
Ending On A Strong Note Recom : Market Perform

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
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
EPS chg (%)
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

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

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
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


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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
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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

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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.

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