Results

• Within Expectations - Reported 4QFY17 and FY17 core earnings of RM204.2m and RM743.1m, achieving 101.9% of HLIB expectation for FY17 and 105.6% of consensus.

Deviations

• None.

Dividends

• Proposed interim dividend of 5 sen/share and distribution of 1 treasury share for every 50 existing shares, translating into total 5.5% dividend yield.

Highlights

• YoY: Core earnings increased by 36.5% in tandem with higher group revenue by 20.9%. YTLP recorded stronger contributions from Singapore Seraya (lower operational costs) and lower loss from YES Communication (higher revenue base), which was partially offset by lower contribution from Wessex water (higher interest costs and RM appreciation against UK£)

• QoQ: Similarly, core earnings improved by 12.0% (vs. revenue increased by 9.8%), attributed to lower loss of Contracted Power Generation (Malaysia) and higher holding company income.

• FY17: Group revenue declined by 4.2% on expiry of domestic Contracted Power, but core earnings increased by 2.7% due to improved contributions from Singapore Seraya and lower loss from YES Communication.

• Prospects: Near term earnings growth will be driven by extension of Paka Power PPAs for 3 years + 10 months (commencing Sept 2017) and lower loss from YES communication, while contributions from Singapore Seraya and Wessex Water are expected to remain flat. Meaningful growth can be seen by 2020, when Jordan Attarat Power and Indonesia Jawa Power commence operation.

Risks

Downside risks –

• Appreciation of RM against other foreign currencies.

• YTLC facing strong competition from existing telcos.

• Lower regulatory return for Wessex Water.

• Continued pricing pressure (tariff) in Seraya Singapore.

Forecasts

• Remain unchanged.

Rating

• BUY 

• YTLP’s earnings is expected to increase by 2QFY18 following the commencement of Paka Power PPA extension in Sep 2017. Despite the concern on weaker regulatory return for UK Wessex Water, lower loss from YES represents a positive surprise to overall earnings. Long term growth will be driven by commencement of Jordan Attarat Power and Indonesia Jawa Power by 2020.

Valuation

• Upgrade to BUY (from HOLD ) with unchanged Target Price of RM1.60 , based on 10% discount to Sum-of-Parts, in view of bottoming of earnings for YTLP. We expect earnings growth from this financial year onwards.

Source: Hong Leong Investment Bank Research - 30 Aug 2017