YTLP's FY18 results exceeded our expectations but were in line with consensus, accounting for 111% and 97% of FY18 estimates respectively. The surprise was predominantly due to 4QFY18’s surge in earnings contribution from its Wessex Water operations. Our earnings forecasts, rating and TP is under review.

Earnings Buoyed by UK Operations

YTLP’s FY18 PBT grew 5.7% yoy to RM943.2m, attributable to the group’s resumption of its Malaysian power plant operations as well as water and sewerage businesses, which partially offset earnings contraction from its other core segments. A surge in 4QFY18 PBT from its Wessex Water operations (+53.8% yoy, +30.4% qoq) – YTLP’s key earnings contributor – was the key surprise to our FY18 estimates, due to lower operating expenses. Despite that, substantially higher tax expenses recorded for the year led to a PATAMI decline of 10.5% yoy. Overall, earnings tracked above our expectations but fell in line with the street’s, accounting for 111% and 97% of FY18 estimates respectively. An interim dividend of 5sen per share was announced, matching our payout projection for the year.

Dampened by Weaker Singapore Operations and Holding Co Losses

While YTLP’s loss-making mobile segment has stabilised, its Singapore operations remained under heavy pressure amidst an overcapacity environment in the wholesale electricity market. Meanwhile, its investment holding segment also went into the red, on the back of significantly higher financing costs as well as fair value losses on financial investments and derivatives.

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