Sunday, August 25, 2013

YTL Power : Dividend disappoint (DBSV)

YTL Power
KLCI : 1,720.37
Price Target : 12-Month RM 1.70
Dividend disappoint

FY13 profit in line with our estimate but 10% below market expectation
No dividend for 4QFY13; conserving cash for acquisitions
New acquisitions are crucial to cushion against earnings drop after expiry of Malaysian PPAs in 2015
Maintain HOLD rating and RM1.70 TP

Higher water earnings cushioned weaker power contribution. Water division PBT grew 12.5% y-o-y as a result of higher tariff rate since Oct12, and partially offset weaker power contribution from Malaysia (-38%) due to provision for receivables. PBT from PowerSeraya was stable y-o-y, while YES WIMAX operation booked a smaller loss of RM269m (-13% y-o-y) following a larger subscriber base and contribution from Bistarinet. PowerSeraya is the largest contributor (45%) to the group, followed by Wessex (42%) and Malaysia power plants (11%).

Dividend disappoint. YTLP did not declare a dividend in 4Q, and FY13 DPS is limited to 0.94 sen declared in 1Q13. The much lower FY13 dividend yield of 0.6% might disappoint long term investors, but this is a strategic move to conserve cash for future acquisitions. We expect YTLP to continue to bid for regulated assets overseas given its RM10bn cash hoard at end June, to compensate for potentially lower earnings from PowerSeraya and Wessex Water, as well as expiry of Malaysia PPAs in 2015.

Our View
Beneficiary of weaker Ringgit. This is because c.90% of its earnings is derived from outside Malaysia. We estimate a 1% depreciation of the MYR against the SGD and GBP would lift FY14F net profit by 0.4% and 0.5%, respectively. However, the operating outlook for YTLP will be more challenging over the next few years due to rising capacity in Singapore’s electricity market that will eventually pressure margins and sales volumes, and the lingering European crisis could limit returns from Wessex upon the expiry of the current regulatory regime.

Maintain HOLD. The stock lacks near term catalysts. Our HOLD rating is premised on reasonable valuations and stable earnings. Our DCF-derived TP is intact at RM1.70.

Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 23/08/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
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高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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