Monday, August 26, 2013

YTL Power conserves cash for 1BestariNet, no dividend yet

YTL Power conserves cash for 1BestariNet, no dividend yet
Business & Markets 2013
Written by Charlotte Chong of    
Monday, 26 August 2013 10:49

KUALA LUMPUR: YTL POWER INTERNATIONAL BHD [] has not paid dividend in three consecutive quarters as it conserves cash for its 1BestariNet project and future acquisitions.

Analysts said the utility arm of the conglomerate YTL Corp Bhd will keep its cash in its kitty to fund the 1BestariNet project, which it secured two years ago. The project is estimated to cost a total of RM4.5 billion over the next 15 years.

YTL Power normally rewards its shareholders cash dividends every quarter. However, it appears that YTL Power has not declared any quarterly dividends for the last three quarters since the second quarter ended Dec 31, 2012.

Interestingly, it is learnt that the group has invested as much as RM3.5 billion in the 1BestariNet project, which involves the provision of high-speed Internet service for 10,000 schools in east and west Malaysia.

“The supply of the Chromebook is just a small part of the project, which is much more complex than just setting up base stations,” said a source.

The 1BestariNet has become a hot topic of debate at Parliament of late, forcing deputy finance minister Datuk Dr Ahmad Maslan to clarify the value of the different portions of the project.

The minister said the award to YTL included the supply of Chromebook laptops and creation of a virtual learning platform (VLE) for teachers, students and parents costing up to RM513.3 million.

The RM513.3 million from the VLE portion of the 1BestariNet project encompasses fixed term licensing fees of RM250.5 million and management and maintenance costs of RM262.8 million.

Still, the estimated cost of the entire project is a stark contrast to YTL Power’s cash hoard of RM9.55 billion as at June 30.

For the financial year ended June 30, 2013 (FY13), YTL Power net profit stood lower at RM1.05 billion on the back of RM15.82 billion in revenue.

 Net cash flow from operations was RM1.9 billion. As such analysts said YTL Power is also conserving its capital for expansion, consistent with the YTL group’s strategy in the past to buy regulated assets at depressed prices overseas.

Some of the group’s notable acquisitions overseas were the 30% stake in Estonian state oil company Eesti Energia’s oil shale project in Jordan in December 2010 and the Wessex Water in the UK in 2002.

The YTL group has been sitting on its cash hoard after its acquisition of Japan’s famous ski resorts Niseko Village for US$60 million  (RM198 million) in 2010.

It was only last May that the group acquired a portfolio of Marriot hotels in Australia for A$400 million (RM1.19 billion).

RHB Research still does not discount the possibility of YTL Power to pay out dividends for FY14 and FY15 as annual capital expenditure from its WiMAX division is expected to decrease.

In a recent note, it forecast dividend per share (DPS) for YTL Power at 3.4 sen for FY 14 and 3.8 sen for FY15, which translate into annual yields of 2.2% to 2.5% respectively.

Analysts also expect YTL Corp to pay out dividends in future. The biggest beneficiary of the group’s payout will be the Yeoh family, which has a controlling interest in YTL and its subsidiaries through Yeoh Tiong Lay & Sons Holdings Sdn Bhd (YTLSB).

YTLSB owns 3.77% direct shares and 51.35% indirect shares in YTL Power.

Additionally, YTL Power initiated a share buyback programme late last year of up to 10% of its issued and paid-up capital.

It has repurchased close to 161 million shares since February. The company bought back 7.7 million shares last Friday with a total consideration of RM12.2 million with its to-date treasury shares amounting to RM252.3 million.

The Employees Provident Fund (EPF) has been paring down its stake in YTL Power.

Recent Bursa Malaysia filings showed that the EPF cut down its holdings in the company to 7.23% from 9.37% between November 2012 and August this year.

This article first appeared in The Edge Financial Daily, on August 26, 2013.

Publish date: 26/08/13

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