YTLP reported core PATMI of RM24.5m for 2QFY22 (-75.9% QoQ, -78.6% YoY) and RM126.2m for 1HFY22 (-42.7% YoY), below HLIB FY22 forecast (31.5%) and consensus (35.7%). The earnings disappointment was mainly dragged by surge in fuel costs in Seraya Power, losses in Paka Power, lower associate contribution and the group’s on-going social responsibility programme. The recent disposal of Electranet marks on-going restructuring exercise of the group and potential dividend surprises. Maintain BUY with adjusted TP: RM0.75 (from RM0.85) based on 10% discount to SOP: RM0.83.

Below expectation. Reported core PATMI of RM24.5m for 2QFY22 (-75.9% QoQ, -78.6% YoY) and RM126.2m for 1HFY22 (-42.7% YoY). We deem the results below HLIB FY21 expectation (31.5%) and consensus (35.7%). The disappointment was mainly attributed to lower contribution from Seraya Power. Key EIs of -RM23.1m were mainly for impairments for inventories and receivables and forex losses.

Dividend. None.

QoQ/YoY/YTD. Core PATMI declined -75.9% QoQ/-78.6% YoY/-42.7% YTD, mainly due to disappointing contribution from Seraya Power (dragged by surge in fuel costs), on-going loss recognition from Paka Power (ceased operation since June 2021), lower associate contribution and holding co’s contribution to a corporate social responsibility programme (in 1QFY22 and 2QFY22).

Outlook. YTLP has recently disposed its 33.5% stake in ElectraNet for RM3.1bn and the cash proceeds will be used for future investment purposes. Recently YTLP has acquired a 664 ha land in Kulai for 500MW LSS development and acquired Dodid, a 12.5MW data center operator in Singapore. YTLP is also partnering Shopee for the application of the Malaysia Digital Banking Licenses. The commencement for Attarat Jordan Power is now expected in 1QCY22 and 2QCY 22. The acquisition of Tuaspring 396MW Co-gen (pending approval from PUB) will also further enhance Seraya Power’s earnings.

Forecast. Given the results shortfall, we adjusted earnings for FY22 by -33.6%, FY23 by -16.1% and FY24 by -7.9%.

Maintain BUY, TP: RM0.75. Despite the earnings disappointment, we maintain BUY recommendation, with adjusted TP: RM0.75 (from RM0.85), based on 10% discount to SOP: RM0.83 as we believe the current valuation is relatively cheap, while dividend yield may surprise on the upside.

Source: Hong Leong Investment Bank Research - 25 Feb 2022