Investment Highlights

• We maintain UNDERWEIGHT on YTL Power (YTLP) with an unchanged RNAV-based fair value of RM0.60/share. YTLP is currently trading at a FY21F PE of 28.4x. We do not forecast any gross cash DPS for YTLP in FY21F.

• YTLP has declared a share dividend on the basis of 1-for- 16 for FY20. YTLP’s cash dividend was 5 sen/share in FY19.

• Going forward, we reckon that YTLP’s 45%-owned Attarat Power Company would only start commissioning in 1H2021. This is due to a delay in testing and inspections. Hence, Attarat’s earnings contribution may only be reflected in YTLP’s FY22F net profit. We have not accounted for Attarat’s contribution in YTLP’s P&L yet.

• We have also not accounted for the impact of the Tuaspring power plant in YTLP’s FY21F net profit. YTLP’s S$331.5mil (RM1.02bil) acquisition of Tuaspring has not been completed yet.

• YTLP’s FY20 net profit of RM64.6mil was below our forecast of RM253mil and consensus estimates of RM317.9mil. The group recorded a net loss of RM143.8mil in 4QFY20. This was mainly due to a deferred tax charge and impairments on receivables in the UK.

• The group’s net profit (ex-FY19’s RM70.1mil impairment on receivables) plunged by 87.8% to RM64.6mil in FY20 dragged by a deferred tax charge of RM162.4mil, weaker earnings from the water and sewerage division (Wessex Water in the UK) and larger losses in the telecommunications unit in Malaysia.

• The deferred tax charge in 4QFY20 related mainly to an increase in the corporate tax rate in the UK from 17% to 19%.

• Pre-tax profit of the water and sewerage division contracted by 17.7% to RM608.3mil in FY20 from RM739mil in FY19 due to an impairment of RM113.8mil on receivables in 4Q. The impairment was recorded after a review of the impact of Covid-19 on collection of billings from customers.

• Pre-tax loss of the telecommunications division (YES network) in Malaysia widened to RM261.4mil in FY20 from a small pre-tax profit of RM2mil in FY19. Recall that the 1BestariNet contract expired on 30 June 2019.

Source: AmInvest Research - 1 Sept 2020