Period  4Q13/FY13

Actual vs. Expectations  The reported FY13 net profit of RM1.07b came in spot on our estimates but at 9% below market consensus.

Dividends  No dividend was declared again, the third-straight dry quarter. As such for FY13, YTLPOWR only pays 0.94 sen against our assumption of 3.0 sen and 4.69 sen paid in FY12.

Key Results Highlights  FY13 net profit contracted 13% to RM1.07b from RM1.23b in FY12 despite a flattish topline. This was mainly attributable to: (i) weaker local IPPs earnings (PBT -38%) on provision for impairment of receivables; and (ii) higher effective tax rate of 21% in FY13 vs. 17% in FY12. Losses at YES narrowed to a pre-tax loss of RM269.1m from RM307.7m previously. Wessex Water posted PBT hike of 12% on a tariff hike. However, PowerSeraya reported flattish earnings.

 4Q13 net profit surged 20% QoQ to RM307.3m from RM256.2m in 3Q13, largely due on lower taxation for its foreign subsidiaries. Operationally, only PowerSeraya reported improved earnings with PBT surging 45% QoQ while the local IPPs and Wessex Water registered PBTs which declined 39% and 7% respectively while pre-tax loss at YES widened to RM76.2m from RM55.1m.

 On a YoY comparison, 4Q13 net profit dipped 25% from RM407.1m in 4Q12 which included a substantial tax credit from the Wessex Water following a change in tax rate. The local IPPs reported lower PBT by 9% on the impairment provision. However, earnings at PowerSeraya (PBT +181%) were higher on improved sales margin and lower opex while Wessex Water (PBT +22%) benefited from a tariff hike. Pre-tax loss at YES narrowed from RM93.4m to RM76.2m.

Outlook  The Group’s cash pile remained strong at RM9.62b but its dividend payouts have been weakening consistently. Thus, we strongly believe that the group is conserving cash for more M&A opportunities given the current global economic uncertainties which may throw up some good bargains.

Change to Forecasts  FY14-FY15 estimates maintained, but we may look to lower our NDPS assumption of 3.0 sen if no dividend is forthcoming in coming quarters.

Rating Maintain MARKET PERFORM

Valuation  Our price target is retained at RM1.58/share, at a 20% discount to its RNAV.

Risks  Lower dividend payouts, widening YES’ losses and the rise in global economic risks, especially in Europe.

Source: Kenanga