YTLP reported core PATMI of RM114.0m for 3QFY20 (+34.2% QoQ, -5.2% YoY) and RM283.3m for 9MFY20 (-31.9% YoY). We deem the results in line with HLIB FY20 forecast (83.8%) and consensus (81.6%) as we expect 4QFY20 to be affected by Covid-19. Nevertheless, the group has been strategizing in turning around the loss-making assets: Yes communication (aggressive acquisition of subscriber base) and Seraya Power (acquisition of Tuaspring), as well a s securing new PPAs: Tg Jati Power and Attarat Power. Maintain HOLD with higher TP: RM0.75 (from RM0.65) based on lower 20% discount (from 30%) to SOP: RM0.94.

Within expectations. Reported core PATMI of RM114.0m for 3QFY20 (+34.2% QoQ, -5.2% YoY) and RM283.3m for 9MFY20 (-31.9% YoY). We deem the results within HLIB’s expectation (81.6%) and consensus (83.8%), as we expect 4QFY20 to be affected by the implementation of city lockdown in Singapore and UK as measures against the spread of Covid-19.

Dividend. None. Usually Announced in 4Q.

QoQ. Core PATMI rebounded +34.2% QoQ to RM114.0m, mainly due by lower loss from Yes Communications, as the Telco realised the gain from higher subscriber base and average churn rate during the quarter, post aggressive marketing exercises in previous quarter.

YoY/YTD. Core PATMI deteriorated 5.2% YoY and 31.9% YTD, mainly dragged by Yes Communications, following the discontinuation of 1 Bestarinet contract, which were partially offset by the lower loss from Seraya Power on lower depreciation charges during the period.

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. The current construction progress of 554MW Attarat Jordan Power is also being affected by the outbreak of Covid-19 due to restriction of work, but the company will be invoking force-majeure provisions of the PPA. On a positive note, management is making progress in achieving financial close for Tg Jati power project post securing Business Viability Guarantee Letter from Indonesia Government. The acquisition and integration of Tuaspring power generation assets by early FY21 will also allow Seraya to grab higher power market share in Singapore at lower fuel cost (no lock-in take-or pay LNG pricing) and allow for potential synergies with the existing Seraya power assets.

Forecast. Unchanged.

Maintain HOLD, TP: RM0.75. We maintain our HOLD recommendation with higher TP: RM0.75 (from RM0.65) based on lower 20% discount (from 30%) to SOP: RM0.94. While we expect near term outlook to be affected by Covid-19, the group has been strategizing in turning around with the aggressive acquisition of subscriber base (Yes Communications), acquisition of Tuaspring to improve Singapore power market share with lower fuel cost advantage and synergistic benefit, securing new PPAs – Tg Jati and Attarat.

Source: Hong Leong Investment Bank Research - 17 Jun 2020