Posted by OnTime > 2022-05-06 14:27 | Report Abuse

most of revenue is from utilities so of course it's slow growth. high dividend yield is more important for utilities companies

Posted by 263263 > 2022-05-06 14:30 | Report Abuse

once need up, automatic will up!

Posted by dragon328 > 2022-05-06 16:18 | Report Abuse

Utilities companies need to spend on capex and most relies on some debts to expand. No one would use all equity money to acquire an asset or to expand on infrastructure network. It is hence more important to manage the debt level and to ensure all debts are properly secured against the assets at each subsidiary level so that the debts will have no restriction over the holding company's use of cash to expand further.

Posted by dragon328 > 2022-05-06 16:22 | Report Abuse

It is just like when you buy a house, you would not use 100% cash to buy it even though you may have the cash. You will borrow a mortgage to help funding the house purchase. When interest rates go up, you will need to pay a higher monthly instalment so you lose out in high interest rate environment.

For Wessex or a regulated asset business, when interest rates go up, Wessex will get higher water tariffs to compensate for the higher interest rates so to Wessex high interest rates will just get passed though to customers in the form of higher water tariffs. That is the beauty of a regulated asset.

Posted by dragon328 > 2022-05-06 17:26 | Report Abuse

JJPTR, if Wessex defaulted on its bond, it would not have any recourse to YTL Power nor cause any cross default to YTL's other subsidiary or project. YTL Power would still be able to use its gross cash of RM10.6 billion to fund its data centre business or solar power projects, Jordan Attarat Power would still be able to draw on its debts to fund the construction of the power plant, YTL Corp would still be able to use its unencumbered cash reserves to buy more assets.
But Wessex itself would suffer from bond rating downgrade and possible penalty by the regulator. I would not be worried with such a scenario as I know its regulated asset business would never lose money, its cash flows would always be able to service its debts and provide the returns to shareholders as long as its operating performance is inline with regulatory requirements. As long as Wessex performs as per requirements, the business will always provide the returns as per the predetermined WACC, which is the weighted average cost of capital.

Posted by dragon328 > 2022-05-06 17:28 | Report Abuse

For argument sake, if Jordan project defaulted on its borrowings, the lenders would go after the assets (the land and power plant, the power purchase agreement, etc) owned by Attarat Power and could not go after YTL Power, as all the project debts are ring fenced to the project itself.

Posted by dragon328 > 2022-05-06 17:29 | Report Abuse

in this example, of course YTL Power would lose its equity money it put inside this project but no more.

Posted by myway > 2022-05-06 19:21 | Report Abuse

dragon328 Why RHB BANK, Axiata and AEON CREDIT SERVICE all have DIGITAL BANK LICENSE company announcement, only YTL does not?

Posted by Fuyohhh > 2022-05-07 09:34 | Report Abuse

Myway, would like to ask where you saw that announcement? Maybe can share? By the way whats bring you here? Why comment YTL but other no see you comment?

Posted by myway > 2022-05-07 10:45 | Report Abuse

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3256842
https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3256855
https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3256963

Posted by ryan7642 > 2022-05-07 13:17 | Report Abuse

Is time to whack son~~~ytlpower div (special?another favco?) is firm n confirm..ytl will benefit the most from it..happy investing^^

Posted by dragon328 > 2022-05-07 16:00 | Report Abuse

Myway, I do not know why there was no announcement from YTL yet on the digital bank license.

Posted by dragon328 > 2022-05-07 16:06 | Report Abuse

JJPTR, Wessex Waters is 100% owned by YTL Power.
When Wessex issues a bond say of 300 million pounds to fund its capex program, those investors who subscribe for the bond will be entitled to some bond yields and they will have assessed the risk and rewards before subscribing to the bond.
If Wessex defaulted on the bond, eg. not able to redeem the bond upon expiry, then the bond holders would go after any cash left in Wessex then try to force Wessex to liquidate some of its assets to repay the bond principal. But the bond holders could not go after YTL Power directly and whatever cash that YTL Power has in the holding company would not be affected by the default of a bond at Wessex which would have no recourse whatsoever to YTLPower.

Posted by dragon328 > 2022-05-07 16:12 | Report Abuse

Of course, if Wessex really could not liquidate any asset to repay bondholders, then YTL Power would help but it would never be an obligation to help.
It is just like when Sam buy a house with say his brother as the guarantor and Sam defaults on the house loan. The bank will first go after Sam's own money or assets, then go after his brother as the guarantor, but the bank cannot go after Sam's father for his father's money and many assets. But Sam's father can help him pay off but it is not his father's obligation to the bank to help Sam.

Posted by dragon328 > 2022-05-07 16:23 | Report Abuse

Come back to Wessex. You need to understand how the business works in order to comprehend what I said earlier that this regulated asset business will never lose money.

The revenue of Wessex or any other regulated asset business (eg. Electranet) comprises two main elements: (1) Component A to cover Operations & Maintenance (O&M) costs, and (2) Component B for capital returns.

Component A is purely a pass-through item based on an agreed sum to cover the expected O&M costs Wessex needs to incur every year to cover its operating costs, manpower, office overhead, maintenance and repair costs for its assets, etc. This sum is pre-determined with Ofwat for every 5 years subject to inflation adjustment every year. For instance, Wessex incurred total O&M costs of about 335 million pounds for FY2021, and it received Component A revenue of about the same to cover the operating costs.

Component B is a revenue sum to give a return to Wessex for spending capex to build the water infrastructure to render its services. In simplicity, this Component B is calculated based on the formula below:
Component B revenue per year = RCV x WACC
where RCV is Regaulatory Capital Value, or the total asset value
WACC is weighted average cost of capital = (1-g)*Ke + g*Kd
where g = gearing ratio
Ke = cost of equity
Kd = cost of debts

Posted by dragon328 > 2022-05-07 16:29 | Report Abuse

Take an example, say cost of equity return allowed is 8.0% and cost of debt is 3.0% and gearing ratio agreed is 70%, then with RCV of Wessex at 3.566 billion pounds in 2021, the Component B revenue for 2021 would have been about:
2.556 bn x [(1-70%)*8% + 70%*3%} = 3.566 bn x 4.5% = 160 million pounds

Wessex did achieve an operating profit of about 166 milion pounds in FY2021.

Posted by dragon328 > 2022-05-07 16:33 | Report Abuse

As you can see from the above formula, if interest rates go up, then Component B revenue will go up to compensate for the higher borrowing costs. If interest rates go up by 1.0%, Component B revenue will go up by 25 million pounds.
As long as Wessex maintains a gearing ratio of 70% or below, then it would always earn more revenue than the increase in interest costs. Wessex gearing was at 69.873% in FY2021.

Posted by dragon328 > 2022-05-07 16:40 | Report Abuse

If Wessex makes lots of profits, eg. earning a big bonus from outstanding operating performance, getting lower interest rates than expected, spending much less capex than required or reduced operating costs, then Wessex will be able to distribute more cash to YTL Power as dividends.
For instance, if Wessex were to make an IPO listing of say 30% of its shares in London stock exchange at 1.6x RCV, then it would raise funds of close to 1.0 billion pounds. After deducting about 300 million pounds for the equity portion of the required 1.0 billion pounds of capex for next 5 years, the balance of 700 million pounds of IPO proceeds could then be distributed out as dividends to YTL Power.

Posted by dragon328 > 2022-05-07 16:47 | Report Abuse

Long term investment funds like retirement funds love these regulated assets which give them secured and steady and growing income & dividends. The Australian superannuity fund just bought over Electranet at 1.6x RCV from YTL Power. That clearly explains why these assets can really sell at 1.6x RCV, which is my valuation for Wessex.

Posted by dragon328 > 2022-05-07 16:55 | Report Abuse

Take the example above, Wessex generated component B revenue of 160 million pounds from curretn RCV of 3.566 billion pounds and at a WACC of 4.5%, giving a return on asset (ROE) of 4.5% (160m/3566m) and return on equity of 8.0% (cashflow to equity = 166m - interest paid 68m = 98m divided by equity value of 3.566bn - 2.315bn debt = 1.251 bn).

Posted by dragon328 > 2022-05-07 17:04 | Report Abuse

If a fund buys into Wessex at 1.6x RCV now, or for an equity value of 1.6 x 3.566bn - 2.315 bn = 3.39 billion pounds, then the fund would get a return on equity of 98m / 3390m = 2.9% p.a.
This may look low but still much higher than 1-year Libor of 2.01% and 5-year US treasury bond yield of 2.5%.
If the fund holds onto this investment in Wessex for 5 years, then RCV would have increased by 500 million pounds to 4,066 million pounds. Assuming interest rates remain at 2.0%, then Component B revenue would go up to:
4,066m x 4.5% = 183 million pounds per year, or an increase of 23 million pounds just from a larger RCV 5 years later. Of course borrowings would have gone up larger too, say for a total capex of 1.0 billion pounds over next 5 years, at 70% gearing, borrowing would have gone up by 700 million pounds and interest costs per year would have gone up by 14 million pounds, so cashflows to equity would have gone up by (23m - 14m) = 9 million pounds p.a.
The the return to equity for the fund would go up to (98+9)m / 3,390m = 3.16%

Posted by dragon328 > 2022-05-07 17:09 | Report Abuse

Assuming every 5 years forward, Wessex would incur same capex and RCV would increase by same 500 million pounds, then returns to equity would go up to 3.4% in 10 years, 3.7% in 15 years and 4.0% in 20 years.
My point is that for a fund that invests in Wessex now, it will get increasing yields / returns on equity over time. Regulated assets like Wessex is so valuable that many long term funds are looking to buy but owners will not sell anything cheaper than 1.5x RCV now.

Posted by dragon328 > 2022-05-08 17:27 | Report Abuse

JJPTR, as per YTL Corp quarterly report ended 31 Dec 2021, it had cash of RM2.815 billion and another RM8.579 billion of fixed deposits, total RM11.4 billion cash.
The total debts of RM11.7b + 31.998b should have included debts at Wessex and Jordan as YTL Corp owns some 55% of YTLPower and so should have consolidated all the cash and debts of YTLPower.

Posted by OngKawKaw > 2022-05-09 19:34 | Report Abuse

CERITA HABIS? SO QUIET NOWADAYS…

Posted by Fuyohhh > 2022-05-09 20:03 | Report Abuse

You got good story want share with us?

Posted by looiting > 2022-05-09 20:13 | Report Abuse

Many Public listed companies which are family owned and run, also very undervalued. The problem is the Board and management only reward and enjoy the wealth themselves through many ways. Every year, these companies throw 5% dividend to shareholders , just like beggars, while keeping the cash in the balance sheet. Shareholders can see the huge pile of cash but shares prices go down because the management is unable to deploy those cash effectively to create earnings growth to move up share price.

Posted by ryan7642 > 2022-05-10 08:35 | Report Abuse

most famous i do believe eg Berjaya/Ytl/IOI/KLK/Spritzer n so on~~~n you can see most of the share price movement n company base..

Posted by OnTime > 2022-05-10 10:16 | Report Abuse

I think u guys can become the ceo/cfo of ytl so u can give all the cash to shareholders and damn with business expansion. Just sell off the company and return all the cash to shareholders and everybody would be happy right?

Posted by looiting > 2022-05-10 13:32 | Report Abuse

Capital allocation is not effective. If can't allocate capital, distribute the cash back to shareholders. Why hold them in balance sheet depreciating in value? If continue to allocate capital to create growth,no need to pay dividends also no problem

Posted by OnTime > 2022-05-10 14:27 | Report Abuse

please suggest some business opportunities for them to deploy their cash

Posted by dragon328 > 2022-05-10 14:54 | Report Abuse

I think the YTL management has been trying to pay dividends as generously as they can. YTL has given out a total of RM28 billion of dividends in past 10-15 years. In the past 2 years FY2020-2021 when it made a small accounting loss, YTL still paid out 2.5 sen of dividends.

Yes dividend payouts have been cut down in past few years as business operations of its subsidiaries were affected by covid-19 pandemic and other reasons, but things should be looking up again soon.

Posted by dragon328 > 2022-05-10 14:58 | Report Abuse

It is easy to say to distribute out all cash in balance sheet and close down the company. I hold a contrarian opinion, in fact I think the best is still to strike a good balance of giving decent dividend yields of 6%-7% p.a., while maintaining a good cash warchest to get ready to scoop up good assets at bargain sales. And I think good opportunities are coming in next 2 years as US interest rate hike cycle kicks off aggressively and soon we may see many companies going into bankruptcy.

Posted by dragon328 > 2022-05-10 15:03 | Report Abuse

It would be nice to get a supernormal dividend now from the company but that cash dividends received by us now might be hard to generate more income than it would when sitting at the company. Small investors like us may buy some stocks at cheap prices but it would be very difficult for us to buy up a good asset of say RM1.0 billion that could give good returns. But YTL is now in a good position to look for bargain sales. It would be nice if it could get another choice landbank like the Niseko land at distressed price, or buy into another world class hotel like The Marriott at Sydney Harbour.
For a start, YTL will deploy some of its cash into good use by developing the digital bank it owns with Sea Group.

Posted by dragon328 > 2022-05-10 15:07 | Report Abuse

YTL has increased its borrowings when buying up good assets in the past 10 years. It takes time for these assets to develop and increase value to a certain level for YTL to lock in profits. For example, when it bought the Niseko land at just USD60 million and quickly sold it off at say double the price in the following year, then it would have missed out on the explosive value growth of the Niseko land in past 5 years, which has ballooned to a market value of USD2.0 billion. Of course it is now subjective as to whether it is the right time to sell it. One may say a capital gain of over 30 times in few years is very good already, but another may say if you sell it now, what if the land value became USD10 billion 10 years later??

Posted by dragon328 > 2022-05-10 15:09 | Report Abuse

Nothing is absolutely right or wrong in business, just like you never buy a stock at the lowest and can never sell a stock always close to the peak. I have conviction in this YTL management to deliver this time round.

Posted by dragon328 > 2022-05-10 15:14 | Report Abuse

You may choose to sell off YTL if you think it is too slow, or you may prefer higher dividend stocks like Astro, but the share price of Astro also does not go up though it has been giving dividend yields of over 8% p.a.
You may have bought into SCGM that just declared a windfall dividend after it sold off its core business to the Japanese. You might enjoy the special dividend from SCGM but what is next? No more already as it will take many years before the management of SCGM could find another business to develop into the size of the core business it just sold.
I wouldn't like any of these but prefer some company that gives decent dividens while I can ride on its growth for many years to come.

Posted by dragon328 > 2022-05-10 15:19 | Report Abuse

Of course we need to assess what YTL management will be performing in next 24 months. If there are plenty of good assets up for grab and YTL would still be sitting on a huge cash pile after 2 years without making any significant acquisition nor distributing higher dividends, then I would be also very unhappy. We should all then go and attend the AGM and try to vote out the management and vote against any director fee payment to the directors.

Posted by ryan7642 > 2022-05-10 16:10 | Report Abuse

wow well said dragon328...u must be hardcore fans with such deep survey and analyst:) let's earn big together ^^

Posted by looiting > 2022-05-10 16:24 | Report Abuse

I've been watching & waiting for major deal during COVID pandemic. All I see is the cash building up in war chest and same song being played. Even Warren Buffett pulled the trigger a few times last 3 years.

Posted by dragon328 > 2022-05-10 17:04 | Report Abuse

ryan7642, haha not really a hardcore fan, but I do receive complaints from a few friends who bought high at above RM1.00. Then I looked at it and found that there is a good chance for the company to rebound strongly this year and next. Ya let's earn big together, nice!

Posted by dragon328 > 2022-05-10 17:07 | Report Abuse

I adore Warren Buffet more, he is sharp and daring, always does what is best for the shareholders. He got a good deal in OXY and HP.

Posted by OnTime > 2022-05-10 18:07 | Report Abuse

recession is coming, companies overflowing with cash will do very well

Posted by 1pingpong > 2022-05-10 20:58 | Report Abuse

macam going to ground floor

Posted by Fuyohhh > 2022-05-11 16:12 | Report Abuse

https://www.bnm.gov.my/-/monetary-policy-statement-11052022

Posted by looiting > 2022-05-13 10:27 | Report Abuse

If a company is so undervalued, you must be aware that there's not much share buy back despite the share price drop for 10 years. In the announcement section, all I see is ESOS , ESOS and more ESOS. How long term shareholders make money for the past 10 years is beyond my imagination. What's for sure, the management have been enjoying good days everyday

Posted by dragon328 > 2022-05-13 10:48 | Report Abuse

That may be right. The company needs to do something to reward long term shareholders, not just gives ESOS at cheap prices to themselves and employees. It should embark on aggressive share buyback to at least support the share price, like what IGBB has been doing.
With improving operating cash flows, the company should increase the dividend payouts as soon as possible. When the price is right, it should sell some of the assets to realise profits and return special dividends to long term shareholders.

Posted by nicholas99 > 2022-05-13 10:49 | Report Abuse

reward jor people also will sell 1 la. sell or not sell nothing to do with rewards. those dividend high share, people also sell.

important tips: the company must have vision and path to grow. and its there for everyone to see.

Posted by looiting > 2022-05-13 12:21 | Report Abuse

"Makan Pau, sell Pau " .... Good salary, suka suka go vacation . Song song go on TV talk bullshit stuff. Pakai cantik cantik. Make up nice nice. Mana boleh pah pia.

Posted by dragon328 > 2022-05-13 16:11 | Report Abuse

looiting, you should go attend YTL AGM pakai koyak koyak and shoot the management on why the share price is at such a depressed level. Lets see then if they still pakai cantik cantik and talk bullshit. We support you there

Posted by Fuyohhh > 2022-05-13 18:46 | Report Abuse

Haha yes, tell them we want rm1 back, those glory dayss, even mbsb do better, ops