KEY INVESTMENT HIGHLIGHTS

• 3QFY20 was ahead of our estimate but within consensus, core earnings down -9%yoy dragged by absence of Bestarinet contribution mainly

• Attarat Jordan shale power plant completion affected by pandemic outbreak

• FY21F tweaked lower to reflect delay in Attarat COD, but FY20F unchanged as weakness expected in 4QFY20

• TP unchanged at RM0.70, but downgrade to NEUTRAL as stock is already trading close to our TP

Ahead of estimates. YTLP reported 3Q20 core net profit of RM101m, which brought 9MFY19 core earnings to RM264m. This was slightly above our estimates but within consensus, at 82% and 72% of FY20F respectively. The deviation mainly due to lower than expected losses at Seraya year-to-date. Group earnings were down 9%yoy and 37%ytd. The lower earnings year-to-date was mainly due to larger losses at the telco division due to expiry of the Bestarinet project which expired in FY19.

Power generation. The power generation division (which reflects the Paka short-term PPA extension till June 2021) saw revenue fall 5%yoyo in 3QFY20 due to lower energy payment. However, pretax was relatively stable at circa RM14m-RM15m as this is mainly driven by capacity payment which remains stable.

Seraya. Pretax losses narrowed to RM38m in 3QFY20 vs RM87m in the same period last year despite lower revenues (-39%yoy). This was mainly due to higher fuel oil tanking lease rates, higher retail and ancillary margin and lower depreciation charges. According to EMA of Singapore, supply capacity is expected to contract by 7%/4% in 2020/21 while reserve margins are expected to reduce to 21% by 2023 from 33% in 2020. Coupled with consolidation of players (following YTLP’s purchase of the Tuaspring plant previously owned by Hyflux), underlying sector dynamics should improve. However, the macro weakness following the pandemic outbreak could drag near-term performance.

Attarat Jordan power plant delayed. Construction of YTLP’s Attarat oil shale fired power plant in Jordan (owned via 45% stake in Attarat Power Company, APCO) is seeing delays vs. the scheduled COD in June 2020. This is due to the pandemic outbreak which led to restrictions on works at the site. As such, APCO will be invoking the force majeure provisions of the PPA. We gather however, that this will not involve any significant cost overruns.

Source: MIDF Research - 17 Jun 2020