Posted by observatory > 2022-05-27 14:22 | Report Abuse

@Dragon328, thank you for the quarterly result analysis.
I have a few questions.
1. What is the meaning of "pool prices" in the Multi-Utilities business?
2. PBT for Water & Sewerage segment dropped due to "seasonality impacts". However, YoY PBT decline is even greater than QoQ (from RM145m in 3Q21 to RM89m in 3Q22). Unless the seasonality is not based on 12 month period?
3. The RM86m loss for telco segment is the largest loss over the last 8 quarters covering the entire pandemic period. This is not a good sign. Besides, as expected , Maxis Digi Axiata U Mobile are still dragging their feet despite cabinet decision to maintain the Single Wholesale Network. The dominant players won't let challengers like Yes to have an easy time. I fear a lot more capital has to be sunk into Yes until it can turn profitable, or better still, sold to one of these incumbents.

Posted by dragon328 > 2022-05-27 14:33 | Report Abuse

@Observatory, let me try to answer your questions one by one:
1. The Multi-Utilities business means PowerSeraya business in the competitive electricity market in Singapore. There is an electricity pool market in Singapore where generating companies bid their offer price and quantity of electricity into and buyers buy electricity from. In Singapore, the electricity pool clears the electricity prices based on the bids from generating companies and total demand from buyers every 30 minutes. Some other markets in other countries clear the price every hour. When the supply is tight, then the pool will clear an electricity price very high. When there is oversupply, then the pool price will clear low. Generating companies whose bids get matched with demand will get paid the pool price cleared for each 30 minutes, and buyers will pay the same price to the pool operator who is a clearing house.

Posted by dragon328 > 2022-05-27 14:43 | Report Abuse

2. Seasonality impacts on water supply & sewerage revenue? I am not entirely sure what it means, but I suspect it has to do with the water consumption patterns in different seasons in Wessex. It is also affected by any new contracts awarded to non-household retail market, any new housing projects during the season, and the timing of embarking on certain water infrastructure projects. Profitability is affected by any subsidy in the installation of water meters and timing of claim for any new capital projects. Not 100% sure but that is my understanding.

Posted by dragon328 > 2022-05-27 14:49 | Report Abuse

3. The RM86m loss from the telco segment is discouraging. The company said it was due to lower project revenue recorded, which I am not sure what it means.
On the 5G business, I read that the government has just agreed on equal stakes in the DNS with the 3 major telcos. But this has not actually deterred YTL Yes from rolling out its 5G services and Yes is the first telco to roll that out. Feedback to me indicated that Yes has got encouraging response to its 5G business and new subscribers have increased by hundreds of thousands since its launch.
As to how much more capital to be sunk into this 5G business, I do not expect much other than YTL's subscription to the equity stake in DNS. While other bigger telcos are trying to grab a bigger stake in DNS, it is not much left for YTL to subscribe anyway.
As to how this equity game will pan out and will affect the 5G business, I do not know but I would expect still equal assess to the 5G network, hence YTL Yes will not be disadvantaged anyway.

Posted by dragon328 > 2022-05-27 14:51 | Report Abuse

Frankly speaking, I would also prefer YTLPI to divest at least some stakes in its telco business which has been dragging down its bottom line for years. Now there is a good chance for the telco segment to turn around with the 5G roll-out, it makes more sense now to monetise part of the investment in this 5G business. I think some Korean or Japanese telcos would be interested.

Posted by observatory > 2022-05-28 12:40 | Report Abuse

Thank you for replying. I've read several analyst reports. The general consensus is 3QFY22 results is disappointing but Buy calls are maintained.

Maybank/ CIMB/ RHB/ HLIB say 9MFY22 results achieve just 30%/ 31%/ 43%/ 61% of their FY22 full-year forecast. They have expected more.

We've discussed about the weaker performance of YES and Wessex. However Maybank has also highlighted "higher investment holding losses and lower-than-expected associate contribution". So I took another look.

As your table has shown, the investment holding segment for Q3 records a PBT of RM904m. But the Electranet disposal gain was about RM1.3b (according to Hong Leong). Assuming the RM1.3b gain is pre-tax, it implies Investment Holding segment core PBT = RM904m - RM1.3b = about RM400m loss. The loss is quite substantial as past two years quarterly segment PBT is within the range of RM39 profit (4QFY21) to RM65m loss (1QFY22).

One reason cited by Maybank is "Associate income trended lower QoQ, possibly due to Jawa Power".

Jawa Power is a 57.1% owned subsidiary (Maybank considers it as associate). Based on annual reports, between 2017 to 2022, Jawa Power contributes about RM300m profit annually. So a weak performance at Jawa Power alone cannot explain the quarterly RM400m loss, unless Jawa Power has recorded a loss this quarter.

There could be other reasons that drag down Investment Holding segment performance. What do you think?

Posted by dragon328 > 2022-05-28 17:04 | Report Abuse

@Observatory, I also feel that the March quarterly result was a little below expectation. One culprit was Wessex Waters contributing less earnings but it was well covered by a rebound in earnings from PowerSeraya.
Another weak link was in Yes telco segment that recorded higher losses, I hope the 5G venture will help turn around this segment soon.

Posted by dragon328 > 2022-05-28 17:07 | Report Abuse

The investment holding segment should have recorded some losses after striping out the disposal gain of Electranet. I am not sure of the quantum of losses and where these came from.
I suspect part of the losses could be for corporate social responsibilities. Another possible source of losses might be from Jordan project which is suspended pending an arbitration court case, incurring project costs at site and legal expenses for the arbitration case.
Jawa Power might have contributed lower earnings during the quarter, not too sure

Posted by observatory > 2022-05-28 21:00 | Report Abuse

My impression is CSR spending is/ was mostly for YES which falls under telecommunication segment. I wonder if the management could take the opportunity of the Electranet one time gain to do some impairments of other projects. However it's not mentioned in the quarterly report.

Posted by dragon328 > 2022-05-29 17:00 | Report Abuse

I think the management might have made some impairment loss on Indonesia Tanjung Jati project since the new coal project will unlikely get financing as international lenders focus on renewable projects.
I suspect there was some impairment loss taken on Jordan project as it has been sort of stalled for several months pending the arbitration case. I won't be surprised if they have done that in Q3. They may be able to write it back as and when the Jordan project resumes.