Investment Highlights

• We maintain HOLD on YTL Power (YTLP) with a higher RNAV-based fair value of RM0.80/share vs. RM0.72/share previously. We have raised YTLP’s FY21F net profit by 27.2% to account for higher earnings from YTL Power Seraya in Singapore. We ascribe a three-star ESG rating to YTLP.

• YTLP has declared an interim cash dividend of 2.0 sen per share. We forecast YTLP’s gross DPS to be 3.0 sen in FY21F. YTLP’s share dividend was 4.3 sen in FY20.

• YTLP’s 9MFY21 net profit was 27% above our forecast but within consensus.

• We have not accounted for earnings contribution from the 45%-owned Attarat Power Company in YTLP’s net profit forecasts, yet. Attarat Power Company is currently under international arbitration to reset its PPA after a force majeure was activated. We believe that YTLP invested about US$200mil in Attarat.

• Also, we have not accounted for earnings from the Tuaspring power plant yet as the acquisition of Tuaspring has not been completed yet.

• YTLP’s core net profit surged by 39.0% to RM290mil in 9MFY21 from RM208mil in 9MFY20 as the multi-utilities division (mainly YTLP Seraya in Singapore) swung into profitability. Group effective tax rate was also lower at 24.9% in 9MFY21 vs. 32.2% in 9MFY20.

• The multi-utilities division recorded a pre-tax profit of RM248.2mil in 9MFY21 vs. a pre-tax loss of RM155.2mil in 9MFY20. The earnings turnaround in Singapore in 9MFY21 was driven by higher retail margins resulting from low costs of feedstock locked in when energy prices fell in 2Q2020 and 3Q2020.

• On a negative note, pre-tax profit of the water and sewerage unit (Wessex Water, UK) fell by 24.9% YoY to RM403.0mil in 9MFY21 due to lower water tariffs.

• Pre-tax losses of the telecommunications division (YES network) narrowed to RM172.6mil in 9MFY21 from RM220.2mil in 9MFY20. Revenue of the division rose by 2.4% YoY to RM354.2mil in 9MFY21 due to a higher number of subscribers.

Source: AmInvest Research - 31 May 2021