YTL reported a RM43m net loss in 4QFY18, closing an uninspiring FY18 with a lower net profit of RM362m (-55% yoy) and dividend of 4 sen (FY17: 5 sen). The unexpected 4Q18 net loss was due to write down of inventories, fair value losses of investment properties and forex losses. Overall, the results were below market and our expectations. Our earnings forecasts, rating and TP is under review.

4QFY18 Net Loss of RM43m Due to Lower Property Value, Forex Losses

YTL reported an unexpected net loss of RM43m, breaking a long earnings streak due to inventories write down / FV changes at its hotel and property segments, as well as forex losses. Negative one-off adjustments include RM120m inventories write down (Singapore property project), RM43m loss in fair value of investment properties, RM52m forex losses and RM26m allowance for impairment. Operationally, the utilities segment was the star performance with robust 4QFY18 EBIT of RM378m (+32% yoy), driven by higher contribution from Wessex Water, arising from the reduction in operating costs.

Overall, FY18 Was An Uninspiring Year, Results Below Expectations

All in, YTL’s FY18 net profit of RM362m (-55% yoy) was below the street’s and our expectations at 61% of consensus and 67% of our full year earnings forecasts. The negative variances was largely attributable to weak performance from its hotel and property segment, as well as unabated margins pressure at its cement business.

Segmental Highlights

(i) Construction: FY18 EBIT fell by 18% to RM47m due to an absence of a one-off gain from an arbitration award recorded in FY17;

(ii) Cement: FY18 EBIT fell by 18% to RM220m despite higher sales volume due to competitive environment and lower profit margins;

(iii) Hotel: FY18 EBIT fell by 73% to RM29m due to lower revenue from The Academy Hotel (under refurbishment) and lower sales at Majestic KL, pre-opening losses at Koh Samui’s The Ritz-Carlton and unrealized forex loss; and

(iv) Utilities: FY18 EBIT grew by 21% to RM1.3bn on higher contribution from Wessex Water and Contracted Power Generation.

Earnings Forecasts, Rating and TP Under Review

We Put Our Earnings Forecasts, Rating and Target Price Under Review.

Source: Affin Hwang Research - 30 Aug 2018