YTLP reported core PATMI of RM85.0m for 2QFY20 (+0.2% QoQ, -43.9% YoY) and RM169.3m for 1HFY20 (-42.7% YoY), in line with HLIB FY20 forecast (48.8%) and consensus (46.4%). The severe drop in YoY and YTD earnings, was mainly dragged by Yes Communications, following the discontinuation of 1 Bestarinet contract. Maintain HOLD with unchanged TP: RM0.75 based on unchanged 20% discount to SOP: RM0.94.

Within expectation. Reported core PATMI of RM85.0m for 2QFY20 (+0.2% QoQ, -43.9% YoY) and RM169.3m for 1HFY20 (-42.7% YoY), within HLIB’s expectation (48.8%) and consensus (46.4%).

Dividend. None. Usually Announced in 4Q.

QoQ. Core PATMI remained stable QoQ at RM85.0m (+0.2%) as the higher losses of Yes Communications was offset by the lower losses of Seraya Power and higher contribution from associates.

YoY/YTD. Core PATMI deteriorated 43.9% YoY and 42.7% YTD, dragged by Yes Communications, following the discontinuation of 1 Bestarinet contract.

Outlook. YTLP will remain dragged by loss-making Seraya Power and Yes Communications in the near term, while Wessex Water will be subjected to lower allowable profits with the upcoming implementation of Business Plan 2020 -2025. Nevertheless, we take comfort on the scheduled commencement of 554MW Attarat Jordan Power in mid-2020 and management recent secured Business Viability Guarantee Letter from Indonesia Government for the development of 2 x 600MW Tg Jati Power. Management is proceeding towards achieving financial close, indicating potential plant commencement in 2024-2025. Management is strategizing to turnaround Yes Communciations by leveraging on its Telegraph product in tandem with the implementation of national fiberalization plan, industry 4.0 and 5G network.

Forecast. Unchanged.

Maintain HOLD, TP: RM0.75. We maintain our HOLD recommendation with unchanged TP: RM0.75 based on unchanged 20% discount to SOP: RM0.94. While the group has been facing regulatory uncertainties, we note that YTLP is trading at P/B valuation of only 0.4x with potential dividend of 3 sen (usually divvy in 4Q), translating into 4.2% yield. Furthermore, YTLP has accumulated 482.9m treasury shares (6.3% of current outstanding share), giving potential for future share distribution.

Source: Hong Leong Investment Bank Research - 21 Feb 2020