YTLP reported core PATMI of RM101.7m for 1QFY22 (+398.1% QoQ, -3.9% YoY), below HLIB FY22 forecast (19.7%), but within consensus (24.5%). Seraya Power continued to record profits for 5 consecutive quarters. The upcoming complete acquisition of Tuaspring is expected to further enhance Seraya Power. The group is strategizing to improve Yes Communication with enlarged subscriber base and leverage onto the government’s JENDELA plan for nation-wide 4G infrastructure network. New contribution from Attarat Power is targeted in 2HFY22. The recent land acquisition in Kulai marks the group’s foray into 500MW LSS. Maintain BUY with unchanged TP: RM0.85 based on 10% discount to SOP: RM0.93.

Below expectation. Reported core PATMI of RM101.7m for 1QFY22 (+398.1% QoQ, -3.9% YoY). We deem the results below HLIB FY21 expectation (19.7%), but within consensus (24.5%). Key EIs of -RM36.9m were mainly for impairments for inventories and receivables and forex losses.

Dividend. None.

QoQ. Core PATMI improved 398.1% to RM101.7m mainly due to stronger contributions from Seraya Power (on higher vesting gross margins and pool gain) and Wessex Water, partially offset by loss of income from Paka Power (PPA expired Jun 2021) and higher losses from Yes Communication.

YoY Core PATMI stayed flattish -3.9%, as the loss of income from Paka Power generation (PPA expired Jun 2021) and higher holding-co losses (larger CSR program budget) were offset by stronger contributions from Seraya Power (on higher vesting gross margins and pool gain) and lower losses from YES communication (on higher subscriber base)

Outlook. YTLP continued to show earnings sustainability of Singapore Seraya in 1QFY22 (since 1QFY21) and expects to leverage onto the recent acquisition of Tuaspring 396MW Co-gen (pending approval from PUB) to further enhance the segment earnings. The commencement for Attarat Jordan Power is now expected in 1QCY22 and 2QCY22. Management is working towards securing financing for the new Tg Jati power project post securing Business Viability Guarantee Letter from Indonesia Government in Feb 2020. The group is also acquiring a 664 acre land in Kulai, to be developed into 500MW LSS.

Forecast. Given the results shortfall and post model upkeep for the latest annual report, we adjusted earnings for FY22 by -22.2% and FY23 by -15.2%. We also introduce FY24 earnings at RM545.6m.

Maintain BUY, TP: RM0.85. We remain positive on YTLP’s outlook with Seraya Power leveraging on the recovering Singapore economy, Yes Communication leveraging on increasing data demand in Malaysia and the commencement of Attarat Power in 2HFY22. We also expect sustainable dividend payout by the group. Maintain BUY recommendation, with unchanged TP: RM0.85, based on 10% discount to SOP: RM0.93.

Source: Hong Leong Investment Bank Research - 26 Nov 2021