YTLP reported core PATMI of RM117.4m for 2QFY21 (+15.3% QoQ, +38.1% YoY) and RM219.2m for 1HFY21 (+29.5% YoY), in line with HLIB FY21 forecast (56.3%), but above consensus (66.9%). Seraya Power’s earnings continued to strengthen as Singapore’s economy recovered. The upcoming acquisition of Tuaspring is expected to further enhance Seraya Power. Yes Communication is expected to benefit from Malaysia government’s JENDELA plan for nation-wide 4G infrastructure network. However, Attarat Power may see further delay in commencement as the Jordan government has filed arbitration against the company, 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 expectation. Reported core PATMI of RM117.4 +38.1% YoY) and RM219.2m for 1HFY21 (+29.5% YoY), within HLIB’s expectation (56.3%), but above consensus (66.9%). Major EIs for 1HFY21 include RM38.5m writeback on receivables (mainly related to Singapore Seraya after successfully appeal against High Court’s decision) and RM14.7m impairments on inventory (mainly related to Paka Power).

Dividend. None. Usually Announced in 4Q.

QoQ. Core PATMI improved +15.3% QoQ to RM117.4m mainly due to improved performance of Singapore Seraya Power (Multi Utilities) on higher retail and vesting gross margins (power electricity), higher fuel oil tank lease rate, lower finance costs and improved margins from on-going cost cutting.

YoY/YTD. Core PATMI improved +38.1% YoY and +29.5% YTD, mainly driven by the turnaround of Seraya Power operation and partially offset by weaker contribution from Wessex Water (combinations of lower regulated tariffs and increased depreciation charges on increased capex) and Investment Holding operation (lower share of associate income and interest revenue).

Outlook. Seraya Power’s operation continued to improve into 2QFY21 and is expected to sustain its uptrend as the existing control measures on the economy and people movement are being gradually relaxed with the implementation of vaccination programs and stimulus plan. The upcoming complete acquisition of Tuaspring 396MW Co-gen (pending approval by Public Utilities Board of Singapore) will also further enhance the earnings of the segment. However, the commencement of Attarat Power is expected to face further uncertainties following recent arbitrations raised by the Jordan government and NEPCO (Jordan National Electric Power Company) on grounds of gross unfairness against the power company. Management is also confident that Yes Communication will benefit from government’s recent JENDELA initiative to upgrade Malaysia’s digital communication infrastructure.

Forecast. Unchanged.

Maintain HOLD, TP: RM0.75. We maintain our HOLD recommendation unchanged TP: RM0.75 based on unchanged 20% discount to SOP: RM0.93. Singapore Seraya Seraya has seen material improvements as the economy gradually improved and is expected to gain further with the complete acquisition of Tuaspring Power asset to ride on the recovery of Singapore’s economy. However, Attarat Power is unfortunate to have faced arbitrations proceedings from the Jordan government and NEPCO (country risk) which may drag the commencement of the project.

Source: Hong Leong Investment Bank Research - 26 Feb 2021