Different research house:
What’s Our View
There remains no clarity on the corporate action front. In particular, there is no certainty that YTLP would repeat a 10sen DPS in FY15. Also, the company has not done major share buybacks in FY15 to-date. Recall YTLP’s investment thesis and share price performance in recent years have largely revolved around corporate actions.
Our earnings forecasts are unchanged. Our TP of MYR1.65 is based on a 10% discount to our RNAV estimate of MYR1.84 (fully diluted basis), which is in turn derived from a sum-of-parts, with each operating entity valued using DCF.
Source: Maybank Research - 13 Feb 2015
- Maintained Sell with higher target price of RM1.50 (from RM1.44) based on 10% discount to Sum-of-Parts. We expect earnings to remain depressed in the near term, due to potentially lower margins for Singapore Seraya and UK Wessex Water, with continued earnings uncertainty from YTLC as well as concession expiry of domestic power generation.
Source: Hong Leong Investment Bank Research - 13 Feb 2015
Key Results Highlights Despite topline declining 10%, the 2Q15 net profit inched up 1% QoQ to RM245.1m from RM243.8m. This was mainly helped by the recovery of PowerSeraya earnings and better Wessex Water results. In fact, PowerSeraya managed to post 24% QoQ growth in PBT despite revenue dipping 12% while Wessex Water posted a 17% rise in PBT while turnover remained flattish. Meanwhile, local IPPs registered 43% decline in revenue as a result of TENAGA’s rescheduling of generation program, resulting in pre-tax profit contracting 22%. On the flipside, pre-tax loss for YES narrowed to RM50.0m from RM77.9m as revenue surged 38%.
YoY, the 2Q15 net profit dipped 1% from RM247.0m while revenue contracted 19%. The substantial decline in topline was mainly driven by: (i) lower electricity units sold at PowerSeraya, and (ii) the lower revenue from the local IPPs as stated above. However, the lower decline in bottom-line was helped by: (i) 18% rise in Wessex Water earnings on tariff hike, (ii) there was no provision in local IPPs, and (iii) higher earnings investment arising from higher dividend received, interest income and associate incomes. Similarly, the 1H15 earnings inched up 1% while revenue declined by 17% compared to 1H14.
Outlook Although the strong SGD should benefit YTLPOWR, the electricity market in Singapore remains competitive with new capacity coming onstream. While the PPAs for local IPPs are expected to expire soon, earnings prospect for YES is set to be better judging from its growing subscriber base. For Wessex Water, earnings are expected to be fairly flattish until it gets the next tariff revision.
Change to Forecasts We trim FY15-FY16E earnings by 6%-8% as we lowered PowerSeraya earnings assumption but this is mitigated by higher Wessex Water earnings assumption
Rating Maintain MARKET PERFORM Valuation Our new RNAV/share is RM1.87 from RM1.89 after adjusting for PowerSeraya and Wessex Water earnings. With an unchanged 10% discount to its RNAV, our new price target is RM1.68 from RM1.70 previously.
Risks to Our Call Lower dividend payouts, widening YES’ losses and the rise in global economic risks, especially in Europe.
YTL Power’s (YTLP) 1HFY15 (Jun) results met expectations. We maintain our NEUTRAL call, earnings forecasts and TP of MYR1.69 (4% upside). In our opinion YTLP currently lacks catalysts as it has yet to secure a new power plant project in Malaysia, while its existing concessions are near expiry. Not helping the sentiment on the stock were weak performances from PowerSeraya in Singapore and sustained losses at its WiMAX unit.
A mixed bag. YTLP’s 1HFY15 core net profit of MYR478.2m (excluding forex gains) came broadl in line with expectations at 55%/47% of our full-year forecast/consensus estimates respectively. 1HFY15 core net profit declined 16.2% YoY on the back of weaker contribution from PowerSeraya in Singapore (due to increased competition on expanded capacity in the power generation sector in Singapore) and widened losses at its WiMAX division. There was a slight improvement in performance from its power generation business in Malaysia and Wessex Water in the UK.
Still no new local power plant. We are mindful of the high execution/construction risk of greenfield power plant projects YTLP is pursuing in India and the Middle East as they are prone to delays and hence resulting in potential cost overruns. We believe as far as YTL Power is concerned, “home is where the re-rating catalyst is”. However, a new power plant project in Malaysia has thus far remained elusive. There is a possibility that one of YTLP’s power plants (retiring in Sep2015) may be renewed for 1-2 years due to delays in the completion ofa competitor’s 1000MW coal-fired power plant. However, even if this happens, the impact on earnings is likely to be one-off.
Forecasts. We maintain our earnings forecasts.
Risks: i) Continued losses from its WiMAX division, and ii) earnings volatility at PowerSeraya.
Maintain NEUTRAL. YTLP is unappealing currently as it has yet to secure any new power plant project in Malaysia, while its existing concessions are near expiry. Also, the market is unlikely to get excited over its participation in overseas greenfield power plant projects given the high execution risk. We keep our SOP-based TP at MYR1.69 (see Figure 2).