YTLP reported core PATMI of RM127.2m for 4QFY19 (+5.7% QoQ, -27.9% YoY) and RM543.0m for FY19 (-23.3% YoY), within HLIB FY19 forecast (99.6%). Our core earnings excluded RM100m gain from investments and RM166m of provisions and impairments. Declared a first interim dividend of 5sen/share (ex date: 29 Oct), translating into attractive dividend yield of 7.3%. Upgrade to BUY (from Hold) with unchanged TP of RM0.88 based on unchanged 20% discount to SOP: RM1.11. YTLP is currently trading at an attractive P/B valuation of only 0.4x with dividend yield of 7.3%.

Within expectation. Reported core PATMI of RM127.2m (+5.7% QoQ, -27.9% YoY) for 4QFY19 and RM543m (-23.3%) for FY19 was within HLIB (99.6%) and consensus (99.1%) expectations. Our core earnings excluded RM100m gain on from investments and RM166m provisions and impairments.

Dividend. Declared a first interim dividend of 5sen/share (ex-date: 29 Oct), translating into attractive dividend yield of 7.3%.

QoQ. Core PATMI improved slightly by 5.7%, mainly driven by lower losses from Seraya Power and turnaround of Yes Communication, partially offset by lower contribution from associates.

YoY/YTD. Core PATMI deteriorated 27.9% YoY and 23.3% YTD, dragged by loss in Seraya (lower vesting contract and lower margin), lower contribution from Wessex (higher operating, depreciation and finance costs), which was partially offset by higher contribution from Contracted Paka Power (higher power despatch), lower loss from Yes Communication (higher revenue) and higher contribution at holding co.

Outlook. Losses from Singapore Seraya Power have reduced remarkably in recent quarter, entailing management’s ability in improving revenue stream and streamlining its cost structure. The commencement of Jordan Attarat Power (under construction) by mid-2020 will provide earnings buffer to the YTLP. Tanjung Jati Power is currently in development stage and pending financial close.

Risks… remains on: 1) Wessex Water subject to negative impact from the impending Brexit as well as renegotiation with regulator for the Business Plan 2020-2025; 2) Seraya Power on worsening losses from current quarter; and 3) Yes Communication performance being dragged from the discontinuation of Bestarinet.

Forecast. Unchanged.

Upgrade to BUY, TP: RM0.88. Post recent sell down of YTLP shares, we believe it has become an attractive entry point to relook into the stock, given its attractive dividend yield of 7.3% and P/B valuation of only 0.4x. Upgrade to BUY (from Hold) with unchanged TP: RM0.88 based on unchanged 20% discount (reflect the earnings risks of Seraya Power and Wessex Water) to SOP of RM1.11.

Source: Hong Leong Investment Bank Research - 30 Aug 2019