YTL  Power’s  (YTLP)  1HFY15  (Jun)  results  met  expectations.  We maintain our NEUTRAL call, earnings forecasts and TP of MYR1.69 (4% upside).  In our opinion  YTLP  currently lacks catalysts  as it has yet to secure  a  new  power  plant  project  in  Malaysia,  while  its  existing concessions  are  near  expiry.  Not  helping  the  sentiment  on  the  stock were  weak  performances  from  PowerSeraya  in  Singapore  and sustained losses at its WiMAX unit.

A mixed bag. YTLP’s 1HFY15 core net profit of MYR478.2m (excluding forex gains) came  broadl in line with expectations at 55%/47%  of our full-year  forecast/consensus  estimates  respectively.  1HFY15  core  net profit  declined  16.2%  YoY  on  the  back  of  weaker  contribution  from PowerSeraya in Singapore (due to increased competition on expanded capacity  in  the  power  generation  sector  in  Singapore)  and  widened losses  at  its  WiMAX  division.  There  was  a  slight  improvement  in performance  from  its  power  generation  business  in  Malaysia  and Wessex Water in the UK.

Still  no  new  local  power  plant.  We  are  mindful  of  the  high execution/construction  risk  of  greenfield  power  plant  projects  YTLP  is pursuing in India and the Middle East  as they are prone  to delays  and hence  resulting  in  potential  cost  overruns.  We  believe  as  far  as  YTL Power is concerned, “home is where the re-rating catalyst is”. However, a  new  power  plant  project  in  Malaysia  has  thus  far  remained  elusive. There is a possibility that one of YTLP’s power plants (retiring in Sep2015) may be renewed for 1-2 years due to  delays in the completion ofa  competitor’s  1000MW  coal-fired  power  plant.  However,  even  if  this happens, the impact on earnings is likely to be one-off.

Forecasts. We maintain our earnings forecasts.

Risks:  i)  Continued  losses  from  its  WiMAX  division,  and  ii)  earnings volatility at PowerSeraya.

Maintain  NEUTRAL.  YTLP  is  unappealing  currently  as  it  has  yet  to secure  any  new  power  plant  project  in  Malaysia,  while  its  existing concessions  are  near expiry. Also, the market is unlikely to get excited over its participation in overseas greenfield power plant projects given the high  execution  risk. We  keep  our  SOP-based  TP  at  MYR1.69  (see Figure 2).

Source: RHB