Price (23 Aug 13 , RM) 1.59
TP (prev. TP RM) 1.40 (1.40)
FY13 results disappoint, as the outlook remains uncertain
● YTL Power’s (YTLP) FY13 net profit of RM1.1 bn fell 13% YoY on higher taxes. PBT fell 4% as strong water profit (+12% YoY) was negated by lower power generation profit (-38% YoY) and a one-off gain reported in FY12. Results were within street expectations, but below our forecasts
● The outlook remains poor. Non-renewal of the Malaysian Power Purchase Agreement (PPA) is compounded by the large power generation cap acity increases in Singapore that will for its adversely affected YTP's merchant power unit.
● Upcoming UK water regulatory review may curb future earnings of 100% owned Wessex Water that accounts for 50% of YTLP's FY13 pretax profit.
● On the back of the results, we cut our FY14-15 forecasts by 11- 12%. Given the uncertain outlook, we maintain UNDERPERFORM rating. For exposure to the YTL group, we prefer YTL Corp.
The outlook in Malaysia remains poor, given the non-renewal of the Power Purchase Agreement (PPA) for its Pasir Gudang plant (which expires in 2016) and continued losses at its WiMax telco division. More importantly, YTLP's wholly owned Power Seraya in Singapore will be adversely affected by the 30% capacity increase in the island state between 2013 and 2014. Reserve margins in Singapore are expected to increase to 47% in 2013 (from 37% in 2012) and will to 2012 level only in 2020E.
YTLP's 100% of UK water utility company, Wessex Water, contributed 50% to FY13 PBT. Like other UK water companies, Wessex Water benefitted from high RPI and low financing costs relative to regulator OFWAT’s assumptions. However, OFWAT Chairman Jonson Cox has spoken against the generous returns by shareholders, suggesting more should be shared with customers. Upcoming UK water regulatory review may curb future earnings, which is not reflected in our forecast.
On the back of these results, we cut our FY14-15E forecast by 11- 12%.Given the uncertain outlook, we remain negative on YTLP and reiterate the UNDERPERFORM rating on the stock with a RM1.40 target price. For exposure to the YTL group, we prefer YTL Corp.
Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 26/08/13