YTLP reported core PATMI of RM101.8m for 1QFY21 (+29.4% QoQ, +20.8% YoY), in line with HLIB FY21 forecast (26.8%), but above consensus (33.6%). Seraya Power has turnaround during the quarter due to lower finance costs and costcutting measures. The recent acquisition of Tuaspring is expected to further enhance Seraya Power. The group is strategizing to improve the only lossmaking entity - Yes Communication by leveraging onto the government’s JENDELA plan for nation-wide 4G infrastructure network. New contribution from Attarat Power is targeted by end 2020, while management is still working towards financial closing of Tg Jati Power. Maintain HOLD with unchanged TP: RM0.75 based on 20% discount to SOP: RM0.93.

Within expectations. Reported core PATMI of RM101.8m for 1QFY21 (+29.4% QoQ, +20.8% YoY). We deem the results within HLIB FY21 expectation (26.8%), but above consensus (33.6%). Key EIs of -RM25.9m were mainly for impairments for inventories (related to YTL Paka) and receivables and forex losses.

Dividend. None.

QoQ & YoY. Core PATMI improved 29.4% QoQ and 20.8% YoY, mainly on the turnaround of Singapore Seraya to PBT RM36.1m (from -RM17.1m in 4QFY20 and - RM69.2m in 1QFY20) on higher fuel oil tank lease rate, lower finance costs and improved margins from on-going cost cutting resulting higher contributions retails, ancillary and oil tank leasing. Profit from Paka Power Generation (excluding the one-off impairments on inventory amounting to RM15.7m during the quarter) and losses from Yes Communications remained stable during MCO period.

Outlook. YTLP has shown strong commitment with the turnaround of Singapore Seraya in 1QFY21 and expects to leverage onto the recent acquisition of Tuaspring 396MW Co-gen to further enhance the segment earnings. The delay in the commencement for Attarat Jordan Power is inevitable, and management is working towards end of 2020 (we are assuming only mid-2021 to be conservative). Similarly management is making progress in securing financing for the new Tg Jati power project post securing Business Viability Guarantee Letter from Indonesia Government. Wessex Water will be subjected to lower allowable profits with the new implementation of Business Plan 2020-2025.

Forecast. Post update on annual report, we adjusted earnings for FY21 by +2.5% and FY22 by +10.6%. We also introduce FY23 earnings at RM484m.

Maintain HOLD, TP: RM0.75. We maintain our HOLD recommendation with unchanged TP: RM0.75 based on 20% discount to SOP: RM0.93. The group seems to be relatively unaffected by the Covid-19 and implementation of lockdowns in its countries of operation. Management 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, and commencing new PPAs – Tg Jati and Attarat.

Source: Hong Leong Investment Bank Research - 27 Nov 2020