Core PATMI of RM20.4m for 4QFY21 (-87.4% QoQ, -74.1% YoY) and RM402.3m for FY21 (+10.2% YoY), were below both HLIB FY21 forecast (79.7%) and consensus (91.8%), due to lower-than-expected contribution from Seraya Power and Wessex Water. YTLP will continue to leverage onto Seraya Power’s profitability with earnings growth momentum from the anticipated acquisition of Tuaspring Power, and Yes Communication on increasing demand for data packages. Declared 2nd interim dividend of 2.5 sen/share, totalling 4.5 sen/share (6.3% yield) for FY21. Maintain BUY with unchanged TP: RM0.85 based on 10% discount to SOP: RM0.93.

Below expectation. Reported a dismal core PATMI of RM20.4m for 4QFY21 (-87.4% QoQ, -74.1% YoY) and RM402.3m for FY21 (+10.2% YoY), below both HLIB’s expectation (79.7%) and consensus (91.8%), mainly due to lower-than-expected contribution from Seraya Power and Wessex Water. Major EIs for FY21 include deferred tax adjustments of -RM545.3m due to net provisions for the recent corporate tax revision to 25% (from 19%) in UK, partially offset by disposal gains/revaluations/writebacks of RM76.6m and unrealised forex gain of RM11.1m.

Dividend. Declared a 2nd interim dividend of 2.5 sen/share (ex-date: 23 Sep 2021). Total dividend for FY21 would be 4.5 sen/share (6.3%).

QoQ/YoY. Core PATMI declined -87.4% QoQ and -74.1% YoY to RM20.4m mainly due to lower contributions from Wessex Water as the subsidiary entered into lower regulated pricing period with higher operating expenditure during the quarter, as well as lower earnings contribution from Investment Holding co (partly due to lower profit contribution from associates YoY).

YTD. Nevertheless, YTD core PATMI still improved +10.2% YTD, mainly driven by the turnaround of Singapore Seraya Power operations (on higher retail margin and lower finance cost) and lower losses from Yes Communication, partially offset by weaker contribution from Wessex Water (combination 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 has continued to maintain its profitability into 4QFY21 (since 1QFY21) and is expected to sustain its profitability as Singapore economy recovers in 2021 with more relaxations being implemented along with stimulus pla ns. The anticipated complete acquisition of Tuaspring 396MW Co-gen (pending approval by Public Utilities Board of Singapore) will also further enhance the earnings of the segment. Yes Communication will continue to expand its subscriber base as the movement controls have accelerated demand for data communication in the country, while leveraging on government’s JENDELA initiative to upgrade Malaysia’s digital communication infrastructure. However, the continued delay of Attarat Power commencement and Tg Jati Power financial closing have not been able to provide contribution replacement for the recently expired Paka Power PPA in June 2021.

Forecast. Unchanged.

Maintain BUY, TP: RM0.85. Despite the dismal 4QFY21 performance, we remain positive on YTLP’s outlook with Seraya Power leveraging on the recovering Singapore economy and Yes Communication leveraging on increasing data demand in Malaysia. We also expect sustainable dividend payout by the group. M aintain BUY recommendation, with unchanged TP: RM0.85, based on 10% to SOP: RM0.93.

Source: Hong Leong Investment Bank Research - 9 Sept 2021