It is quite normal for many infrastructure projects not to proceed and just stop at the planning stage. At least we have seen some already up and running and Bidor terminal is under construction and Tronoh likely up next.

haha it takes a big blackout in several states today to push up YTLPower share by 4%.

BTW, YTLPower share price has just broken up 0.70 with MACD showing a golden cross. I hope it has bottomed up and is on its way to retest previous high of 0.80-0.83

nicholas99, if you have more money, it is always good to invest some in the US stock markets that have plenty of world class companies that enjoy higher valuation. But valuation is an issue, it is not easy to find under-valued stocks in the US that has potentials to go up multiple times, the market there is so much more efficient than Bursa as there are thousands of analysts and fund managers screening through stocks. BTW, pls share if you find any good undervalued stock in the US or here in Bursa

It looks like DoggieInvestor is another retail investor who has got stuck in YTL or YTLPower shares for too long, and has either cut loss or suffered huge paper loss.

Whatever the case it is, do not let emotion run over your head. Stock markets always look forward, the past is past. Let it go and learn the lesson.

Just look at BJFood, a Vincent Tan company, that has taken off to great heights. This is despite the fact that Vincent Tan's group of companies have suffered long period of bad impression due to the not-so-good related party transactions involving some of his companies. But investors have short memory and always look forward. Cheer up!

DoggieInvestor, true that Google and Microsoft or Amazon are cash rich, but it does not mean that they need to build and own everything such as data centre to operate their business. It is just like Starbucks does not need to own all the land and properties in order to operate a coffee joint.
It is not hard to check how many data centres in Singapore are actually built and owned by a third party rather than these tech giants who use the data centres.

As I mentioned before in my previous article on YTL Power, there are huge advantages of setting up data centre in Malaysia/Johor as the land cost and electricity costs are much cheaper than that in Singapore. Furthermore, what YTLPower is building is green data centres to be powered by solar power which is lacking in Singapore.
The fact of the matter is that YTLPower has already managed to secure clients for its first green data centre in Kulai. Wake up my friend!

The company needs to make a good estimate on the financial hedges required for the months ahead vs projected cement production volume and production schedule and any planned increase in bulk cement prices, so as not to over-hedge at unfavourable high coal prices, otherwise it would result in derivative losses should coal prices fall below the hedged price.

If the company had entered into financial hedges to cover 80% of the coal cost for Q4 at average hedged price of USD300/ton, then these hedges would have resulted in a derivative gain of RM585m x 50% x 80% x (USD400-300)/300 = RM78 million. These derivative gain would be extra gain if the increase in cement selling price had been sufficient to cover the coal cost increase as calculated above.

You are right, I do not see any derivative financial asset in Mcement balance sheet as of 31 Mar 2022. I think they only entered into hedges from April and these should show up in the 30 Jun 2022 accounts.

In Q3 ended 31 Mar 2022, the revenue was RM795m and cost of sales amounted to RM585m. Assuming 50% of cost of sales was coal cost and coal cost has increased by 53% to USD400/ton in Q4 from USD260/ton in Q3, cost of sales would have increased by RM585m x 50% x 53% = RM155m. The company would need to increase cement selling price by c.20% from RM270/ton to RM330/ton to cover the increase in coal costs, assuming no hedging on coal cost was done. Revenue would have increased by RM795m x 20% = RM159m, just enough to cover the increase in coal cost for Q4.

I believe when the company prepared this Annual Report in late 2021 or early 2022, coal prices had not increased as much, and so the company did not enter into any hedging for coal costs in 2021.
But after seeing the spikes in coal prices in early 2022 and how it has impacted the bottom line, I think the management should have taken the necessary steps to hedge against further rise in coal prices.
There may be some difficulty in hedging its coal exposure in that the demand for bulk cement is not certain and is mostly covered in short term trades / wholesale volume, so it is hard to estimate the cement production volume for months ahead and hence coal requirements. But it is more likely to estimate the minimum production volume or get a firm / probable orders from customers for 2-3 months ahead, and to enter into hedging contracts to lock in the coal costs for the projected cement production for the 2-3 months ahead.
As the hedges expire in July and the company needs to enter into new hedges, the reference coal prices have increased again and so the hedged price is higher. Therefore, we are likely seeing another round of cement price hikes in coming weeks.

Yes coal prices have almost doubled up since early of the year and I believe that has put off investors from MCement. Furthermore MCement reported a below par quarterly result for Mar qtr. I think they had not expected the big jump in coal prices too. Though they raised the selling price of bulk cement to RM270 per tonne in Jan-Mar 2022 but that was not enough to cover the coal cost increase.
I learn that cement prices have been raised further to RM320-330 per tonne since April but it all depends now on how much coal costs they have hedged for and at what coal price level the hedges were, in order to ascertain MCement could make a good profit for June qtr and for subsequent quarters.

One reason I could think of why Maksima Timue incurred a small loss is because they wanted to park most of the profit at Perak Transit where they have capital allowance to offset against income tax. Had they park big profit at Maksima Timur, this company would incur a full 25% income tax rate. That's my view, to be confirmed with management.

There must be some reasons why the company structures the project facilitation fee through another company in Maksima Timur. The ownership is different and the expertise could be different in these 2 companies.
For Maksima Timur to carry out project facilitation for other parties, it needs to utilise some of the facilities at existing terminals of Perak Transit and some manpower / expertise from Perak Transit, so it does not need to have big asset nor office overhead. It does not carry out construction activities so it does not need to have construction equipment or construction workers.
It is primarily involved in providing consultation services, expertise in relation to transportation terminal design and construction and operations & maintenance, project management, liaising with local authorities and SPAD, etc.

As you may know, typical construction projects involve a construction company, architect, consultants and a project management company. Architects and C&S/M&E consultants may earn a fee of 2% to 5% of the project costs, and the project management company may earn a fee of 2% to 7% of project costs to manage the project from planning, development, getting approval, supervision of construction works to completion.
It is rather reasonable for Perak Transit / Maksima Timur to charge a project facilitation fee of 2% of project GDV. They could charge higher if a terminal project achieves final investment decision and proceeds with construction so that they can provide project management services throughout the construction phase.

@PSAi3alert, thank you for highlighting the financials of Maksima Timur.

While it may be strange for Maksima Timur to incur a loss in 2021, please note that the financial year end of Maksimar Timur is 30 Sept while for Perak Transit the financial year end is 31 Dec. There could be a timing difference in the recognition of revenue and costs for these 2 companies in relation to the project facilitation fees.

I saw almost full booking at The Ritz Carlton hotel in May-June, and can expect similar activities in other hotels, so I think YTLREIT should have done well for the June qtr

@observatory, I under-estimated the coal cost impact on MCement bottom line for the March 2022 quarter, coal cost & electricity costs should make up 50% of total operating costs instead of 40%.
If what I heard is right, the company should have done some hedging of the coal costs to mitigate further rise of the commodity price. I do hope that we can see much better earnings from MCement in this June quarter result.

To me as a minority shareholder of YTL Corp, it was a good deal for YTL Corp to privatise YTL Land and YTL Cement at a substantial discount to their fair value. The subsequent move by YTL to buy over Lafarge Cement then inject it into MCement was a master stroke that created lots of value for shareholders of YTL Corp.

The privatisation of YTL Land and YTL cement was unique in each case, as both counters were illiquid and trading at deep discount to their respective NTA / fair value. The privatisation provided a good chance for the minority shareholders of YTL Land and YTL Cement to exit their position in exchange for the shares of YTL Corp which was far more liquid.
Many minority shareholders of YTL Land or YTL Cement complained of the low privatisation price, but from the other angle, it was not the fault of YTL management. The market ascribed a low value to YTL Land and YTL Cement and YTL Corp could not offer a big premium to market value, but a fair exchange of YTL shares so that minority shareholders could continue to ride on the growth of the company.

we can expect good earnings from YTLPower and cement division in this Q4

The initial feedback from the management is encouraging. They clarified that project facilitation fee is mainly consultancy fee received by providing advice and expertise in relation to new terminal development, typically at 2.5% of project GDV but sometimes higher.

The reason for increasing PFF in recent years is because the group has ventured more to other states to advise state authorities / developers on new terminal projects and also rejuvenation work on existing transportation terminals to improve on rental income. Some of the new terminal projects are just at planning stage and may not even get constructed but Ptrans charged for consultancy services at this early stage of development.
As for the huge amount of RM39m p.a. in FY2020-2021 and implied GDV of over RM1.0 billion, the management clarified that these were from a number of projects in different states, each with a GDV of RM200m - 400m. Due to confidentiality, the management cannot disclose some of these projects and their owners/locations yet until the project finally achieves Final Investment Decision (FID) and the project owner announces it publicly.

Malakoff used to be a good company too, but it has disposed off most of its RE assets in Australia and overseas, left now only with Tanjung Bin Energy which has a finite life of 30 years Power Purchase Agreement (PPA) with Tenaga. It does not seem like any much upside to Malakoff in near term besides the high dividends.
More so to worry about counter-party risk in Malaysia amidst high fuel cost environment.
I would prefer YTL Power that is enjoying strong rebounds in earnings from PowerSeraya, strong forex gains from weakening ringgit, perpetual assets in Wessex and PowerSeraya, promising outlook in its green data centre park, potential huge upside in digital bank venture, and strong rebounds in telecommunication division driven by 5G network, etc.
I am confident the dividend yields from YTLPower will catch up with that of Malakoff from FY2023 onwards.

From AR 2021, project facilitation fee made up RM39m out of total revenue of RM89.6m for FY2021 and made up RM39.55m out of total revenue of RM70.95m for FY2020.

The amount has gotten bigger since 2019. It implies a total project GDV of over RM1.50 billion handled in each year of FY2020 and FY2021 assuming a same 2.5% fee margin. No information is given on what projects the company has handled though.

I shall try to get more info from company management then.

Don't get me wrong. I do think this is a great company with unique business model.

Have a great weekend!

Thanks TreeTopView. No I am no Jonathon

I shall check its 2021 AR

There is no visibility in such project facilitation fee in next few quarters. If I were to strip out this facilitation fee, full year profit before tax may total RM54 million only and net profit at RM40.5 million or EPS of just 5.7 sen.
Before we get more visibility in such project facilitation fees, I would caution in chasing high.

There has been no breakdown of how much this project facilitation fee has contributed to the company earnings since FY2020. Only in the March FY2022 quarterly result notes, it mentioned that the increased in group revenue and earnings in Q1FY2022 from Q4FY2021 was due to recognition of project facilitation fee in the Q1FY2022 quarter.

It implied a project facilitation fee of RM7.7m in revenue contribution and RM6.0m in Profit before tax contribution. Annualising this will give a total revenue contribution of RM30.8m contribution from project facilitation fee, and this would be a new record high.

Project facilitation fee has ballooned to over RM29 million in FY2019 from RM3.8m in FY2014 and RM9.6m in FY2015. While the 2016 IPO prospective detailed breakdown of the project facilitation fee in FY2015 (i.e. from Terminal Kampar, Kemaman and Kota Bahru) totalling RM9.67m which was 2.5% of total project GDV of RM386.48m.

With a project facilitation fee of RM29.35m in FY2019, it means such fee was earned from projects with total GDV of RM1,174m assuming the same 2.5% fee margin. What were these projects that cost over RM1.17 billion?

How do you address the elephant in the room issue - project facilitation fee and all from a single party - Maksima Timur Sdn Bhd?!

The project facilitation fee issue has been elaborated by Choivo Capital at:

https://choivocapital.com/2020/05/23/perak-transit-berhad-the-peculiar...

You are welcome, dick20 & Observatory.

As minority shareholders, we can only rely on the controlling shareholder to create more value for the company and declare higher dividends. When they create more value like buy assets cheap and sell it high to unlock value (eg. made a return of 24.8 times from Electranet in 20 years) then distribute more dividends or declare a special dividend. When they do that, all minority shareholders, passive investors like EPF and themself as major shareholders will benefit.
I agree with you that when Dato' Yeoh Seok Hong accepted the interview with media and grumbled about the low share price of YTLPower, he definitely wanted more parties to appreciate the value in the company.

As YTL Corp holds majority in YTLPower and relies a lot on dividend streams from the latter, and Yeoh Tiong Lay & Sons Sdn Bhd gets all cashflows thru dividends from YTL Corp, the family fortune relies very much on continued high dividends from YTL Corp and hence YTL Power.
To me and to them, cash flows of the companies and dividends are more important than share price, but as higher dividends are declared, the share price will move higher naturally. As long as dividend yields exceed 6.0% p.a., it will attract passive investors or funds like EPF to buy and hold.

The same logic applies to YTLPower-Wessex. YTLPower would be re-rated only if it disposed of an asset and bring back the money or the underlying asset performs well and contributes good dividends.
We can only rely on funds that buy as passive investors like EPF and retailers to push share price of YTLpower up as it starts to deliver stronger earnings and declare higher dividends.

One recent example is the proposed acquisition of Genting Bhd's 53% stake in Genting Singapore by MGM US. Why MGM wanted to acquire the stake in Genting Singapore, and why not buy into the parent Genting Bhd which is trading at a huge discount?

There are a number of reasons:
1) the 53% stake would give MGM a controlling stake in Genting Singapore
2) Singapore dollar is seen to strengthen further and has little risk of devaluation
3) Singapore is stable with little country risk nor regulatory risk

Genting's 53% stake in Genting Singapore is worth more than its entire market capitalisation but to a foreign fund like MGM, the holding company discount means nothing if it cannot get a sizable block in Genting Bhd at such a discount.

The depressed share price of YTLPower currently is due to foreign funds pulling out of Bursa in general and also partly due to weak earnings in past few quarters. But things may change for the better when its various assets start to deliver, starting with PowerSeraya and Yes 5G, then the green data centre park venture and hopefully power export to Singapore and Jordan power station commercial operation.

@Obsevatory, if you remember from the Daibochi privatisation saga, funds like Samarang that had a small stake in Daibochi did not have any say in the privatisation attempt by Scientex boss at a low offer price. What the fund could do was to reject the offer. So funds at most just keep a small 5%-6% stake to ride on the long term growth of the company which they have no say.

In the case of YTLPower, why so little foreign fund has invested into it? The main reason is as I said above the currency risk. Another one is the holding company discount. Foreign funds which buy into an asset always prefer a sizable block of over 20% equity stake so as to be able to equity account for the earnings, eg. KKR for a 25% stake in Northumbrian.

However, YTLPower is tightly held by the Yeoh family and foreign funds know that it will be hard for them to get any sizable block of shares over 5% without going to Yeoh family themself. And to buy a sizable block of shares from Yeoh family would likely fetch a high premium over market price.
Furthermore, any fund that has over 10% stakes in YTLPower may not even get to appoint a director into the board which is tightly held by Yeoh family and allies. Hence the fund buyer would not get any control nor first hand information over the asset they invest in, they can only be a passive investor.

But for Tenaga, the situation is not so rosy. Even though it enjoys monopoly in the electricity transmission and distribution, there is a huge risk associated with its generation segment in terms of fuel cost pass-through. As we know, the residential and commercial electricity tariffs are fixed here, so any fuel cost increase will need to be absorbed by Tenaga first then only it tries to claim back through the fuel cost pass-through mechanism which is to be approved by the government of the day. Given that coal prices and LNG prices have more than doubled since last year, Tenaga is having tough time in passing through the escalated fuel costs. There is no guarantee that it will be always able to claim back fully the extra fuel costs. To foreign investors, this represents a risk too big to take. But local analysts seem to be more comfortable with our government honoring the fuel cost pass-through. I would not take the risk.

As for KKR, the investment in Northumbrian Water will look even more attractive with projected equity cash flows of 4.9% and potential extra gain from strengthening sterling later. And this is a perpetual asset in a AAA rated country with very strong regulatory framework, so there is no regulatory risk nor political risk.

In the case of Electranet sale, it is unique as the buyer who bought over the 33% stake from YTL Power was already a major shareholder in Electranet. The super-annuity fund knows the asset and the regulated business well and being an Australian fund, the buyer would have no currency risk at all. So to them a 2.5% dividend yield at the onset but increasing over years would look attractive to the fund.

Why foreign funds shun Malaysian utilities? One main reason is currency risk, as US Fed is aggressively raising interest rates while Bank Negara is struggling to catch up to defend ringgit.

UK pounds sterling is at decades low against the US dollar, so it makes UK assets attractive to US funds who may enjoy additional returns from any strengthening of sterling few years later.

Foreign funds who want to invest in Malaysian stocks or bonds need to consider the weakening ringgit. They see another 5% to 10% downside risk of ringgit to the US dollars. Hence they will need to get extra 5% to 10% upside in any Malaysian stock or bond before they will put their money in.

Looks like AEON has hit a temporary bottom at 1.28. Hope it is on its way to retest previous high of 1.69 soon, possibly by August end when the June qtr result is out

Yes for regulated assets like Wessex and Northumbrian Water, operating cashflows netted out of equity share of capex for the year will be the equity free cashflows available for dividend distributions. There is a prescribed gearing ratio that these companies need to observe, around 68%-70% as set by some of their bonds or regulator determination.
For budgeted capex of the year, they can borrow money to fund the capex up to the max allowable gearing, the rest to be funded by equity.
As they spend on capex, the PPE increases and hence the allowed amount of debts also increases to maintain the same gearing ratio.
For some companies that have a lower gearing ratio than max permissible of 70%, they can borrow more for capex and hence allow more equity money to be distributed as dividends.

Perhaps they could find another bigger US or Canadian fund to flip it to at 1.6x RCV few years later?

It is for sure that KKR will use heavy leverage to buy the 25% equity stake in Northumbrian. For a top class asset like Northumbrian, I think KKR could get 80%-90% debt financing for the stake purchase.
Being a PE investor, KKR obviously is taking advantage of the weak pounds sterling and the still low interest rates in the US to bet on a strong rebound in pounds sterling few years later. As from asset operations wise, I am not sure how much KKR could squeeze out of it besides the expanding RCV. One possibility is that KKR may see lower capex requirement than what Northumbrian has budgeted for the 2021-2025 regulatory period, hence potential higher dividend payouts. Northumbrian gearing is already at 69.8% close to the max 70% allowed, so there is little room for capital management to squeeze out more cash.
I can only think of the above 2 possible reasons. Perhaps KKR saw something we don't.

From currently on parity with the USD, if pounds sterling appreciates back 30% to 1.30 against USD, KKR would be getting (4.9% x 4 ) x 1.3 = > 25% returns in 4 years

As water companies in the UK are experiencing high inflation and high capex phase, an investment holding company from Asia (eg. CK group) may find the 4.9% equity return low compared to potential opportunities in Asia or other emerging markets. But for a US or western fund, a 4.9% equity return would be decent compared to its low borrowing costs. Furthermore, KKR is buying into Northumbrian when pounds sterling is trading at decades low compared to US dollars. With its RCV increasing over time, Northumbrian would be worth a lot more few years later when pound sterlings appreciates against the US dollars.

I am sure Mr. Li or CK group would have evaluated the deal thoroughly and weigh it with any higher return it could get elsewhere, compared to a 4.9% equity return it would get from Northumbrian Water should it continue holding onto it

Whether a water asset in the UK should be valued at 1.04 - 1.08x RCV or 1.50-1.60x RCV, it ultimately bores down to how much an investor would get in terms of equity cashflows relative to its borrowing costs.
That is why I always like to check it from cashflow perspective if a deal would make sense.

I hope I have not made any fatal mistake in the calculations above. Pls help me to check through the calculations and arguments above.
If the above calculations are right, then the latest KKR deal in Northumbrian Water would simply reinforce my conviction that Wassex Water would be valued at 1.50-1.60x RCV, which means YTLPower is very very much under-valued.

Assuming the £246.3m capex was 70% funded by debts, then equity cashflow would be reduced by 73.9m pounds and hence cashflow yield would be £137.3m / £3,141m = 4.4% which would be still higher than US 30-year bond yield of 3.10%

At equity value of £3,141m, potential investors in Wessex would be getting cashflow yield of £211.2m / £3,141m = 6.7% which is not too far off from the 6.9% KKR will be getting from Northumbrian Water

If at 1.53x RCV that KKR is paying for Northumbrian Water, Wessex would be valued at 1.53 x £3,566m = £5,456m on Enterprise Value (EV).

Minus off net borrowings of £2,315m, the equity value of Wessex would be £5,456m - £2,315m = £3,141m or RM17.2 billion or RM2.10 per share of YTLPower