Sunday, December 1, 2013

YTL Power - Bump in the road (CIMB)

YTL Power International -
Current RM1.94
Target RM2.55
Bump in the road

YTL Power's annualised 1QFY06/14 net profit missed our estimate, accounting for 79% of our full-year forecast. 1QFY14 earnings were dragged down by the continued losses of the mobile broadband division and forex losses. We cut our FY14-15 EPS by 3-10% as we lower our earnings estimates for the mobile broadband division. Our SOP-based target price remains unchanged at RM2.55. We retain our Outperform call on YTL Power. The re-rating catalyst is the 2GW coal-fired power plant tender, which is expected to be awarded to YTL by 1QCY14.


We cut our FY14-15 EPS by 3-10% as we lower our earnings estimates for the mobile broadband division. Our SOP-based target price remains unchanged at RM2.55. We retain our Outperform call on YTL Power. The re-rating catalyst is the 2GW coal-fired power plant tender, which is expected to be awarded to YTL by 1QCY14.

1QFY14 earnings review
YTL Power's 1QFY14 revenue declined by 4.7% yoy due to the 12.9% yoy decrease in the revenue of its multi-utilities division caused by the lower units of electricity sold. Pretax profit fell by 7.1% yoy in 1QFY14 due to the weaker revenue and forex translation losses. However, 1QFY14 core net profit only declined by 5.4% yoy due to the lower effective tax rate resulting from the corporate tax rate reduction in the UK and tax refunds.

Mobile broadband pretax losses narrowed
The revenue of YTL Power's mobile broadband division more than doubled to RM217.8m in 1QFY14 from RM101.7m in 1QFY13. Its losses at the pretax profit level narrowed to RM49.8m in 1QFY14 from RM60.7m in 1QFY13. Although the revenue growth is encouraging, we think that there is a risk that the division may not break even in FY14 due to the industry's challenging operating environment.

2GW coal-fired power plant bid
YTL Power surprised the industry with the lowest bid for the 2GW coal-fired power plant under Track 3B. The power plant will provide stable cashflow and translate into higher dividends in the longer term. Thus, we believe that clinching the bid will be a re-rating catalyst for the stock. The return of YTL Power to the IPP scene indicates that there may be more major contract wins in the future.


Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 22/11/13

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