Me rated BUY.
YTL Power (NOT RATED). YTL Power should be the least impacted of the IPPs given the Take or Pay Nature of its PPA as long as its plants can generate at an availability factor of 70%, TNB is required to pay an equivalent of 70% offtake whether or not it actually despatches the plants. As such, YTL Power should continue to enjoy a high level of despatch. At the same time, the power generation share of the company’s EBIT is down to only 20% as most of YTLP’s profits now come from the water division. We remain favourable on the longer term view of the company and note that it continues to explore new power ventures overseas such as tendering for the new Bibiyana power plant in Bangladesh. We also note that the company is exploring the possibility of electricity and gas ventures in the UK and looking to expand its operations in Australia.
MRCB (TP RM1.42– TRADING BUY) Company Update: Still Resourceful.
Since we re-initiated coverage with a Trading Buy call in March, MRCB’s share price has appreciated by more than 20%. We reckon there may be more upside to the share price given the likelihood of the company securing more jobs on top of a recovery in the equity market, supported by its high beta relative the market. Following some adjustments to our SOP valuation, we maintain our TRADING BUY recommendation with a higher target price of RM1.42 from RM1.14 previously.