YTL Power - Another Benchmark Is Set (Market Perform)

News Update

• Genting announced yesterday that it will effectively dispose of its 75% equity interest in Genting Sanyen Power (GSP) for RM2.54bn to 1Malaysia Development Bhd (1MDB). Assuming there is no other debt left on GSP’s books, the transaction values GSP at an Enterprise Value per MW (EV/MW) of RM4.7m.
• With this benchmark of RM4.7m per EV/MW as a guide for local power assets, we estimate our fair value of YTL Power could increase to RM2.28 (from our current SOP fair value RM2.00 based on DCF for the power assets).
• Should 1MDB proceed to acquire YTL Power’s domestic power assets, we see this as a potential catalyst given that its PPA is the first to expire on Sep 2015 and removes uncertainties over its ability to extend its expiring PPA by another 10 years.

Source: RHB Research - 14 August 2012