Stock Name: YTLPOWR
Company Name: YTL POWER INTERNATIONAL BHD
YTL Power International Bhd
(Aug 4, RM1.97)
Downgrade to hold at RM1.98 with revised target price of RM2.10 (from RM2.51): YTL Power International (YTLP) is likely to see better-than-expected 4QFY11 results on reduced fuel cost at Power Seraya. But, with dividends curtailed by its Indonesian expansion plans, widening losses at YES and potential reduction in tariffs at the Paka & Pasir Gudang IPP, its appeal as a high dividend yielding stock is waning.
Its 9MFY11 pre-tax profit surged 43% year-on-year (y-o-y) while revenue grew by 13% y-o-y. We understand'' the 800mw co-generation unit installed in July 2010 reduced average fuel cost per kWh by 3% to 4%. We do not discount that Power Seraya's sterling results will continue into 4QFY11 lifting YTLP's FY11 net profit above our RM1 billion estimate. Power Seraya contributed 54% to YTLP's 9MFY11 pre-tax profit.
The RM681 million cash raised from the 15% stake sale in PT Jawa Power will likely go towards bidding for a 1,000mw coal-fired IPP in Indonesia. Also, YES is recording average revenue per user of only RM30 against our FY12 assumption of RM49. With a RM500 million cost base for YES, YTLP is likely to conserve cash.
The government's recently set-up MyPower Corp to review power purchase agreements indicates it is serious about reducing IPP tariffs. We estimate that Paka & Pasir Gudang IPPs generate RM400 million in free cash flows (FCF) per year and contribute half of YTLP's dividends. With this under threat, YTLP is again likely to conserve cash.
We maintain our earnings estimates pending 4QFY11 results but slash our yearly dividend per share (DPS) forecast from 13.1 sen to 9.4 sen.
In rolling forward our discounted cash flow based target price to end-FY12, we now assume a lower 1.3 times regulated capital value (RCV) for Wessex Water (1.5 times previously), the multiple that Li Ka-Shing paid for Northumbrian Water last month. Ascribing a 10% discount for uncertainties surrounding YES' earnings outlook and the Malaysian IPPs, our target price is reduced from RM2.51 to RM2.10. ' Maybank IB Research, Aug 4
This article appeared in The Edge Financial Daily, August 5, 2011.
Company Name: YTL POWER INTERNATIONAL BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 2.10 |
YTL Power International Bhd
(Aug 4, RM1.97)
Downgrade to hold at RM1.98 with revised target price of RM2.10 (from RM2.51): YTL Power International (YTLP) is likely to see better-than-expected 4QFY11 results on reduced fuel cost at Power Seraya. But, with dividends curtailed by its Indonesian expansion plans, widening losses at YES and potential reduction in tariffs at the Paka & Pasir Gudang IPP, its appeal as a high dividend yielding stock is waning.
Its 9MFY11 pre-tax profit surged 43% year-on-year (y-o-y) while revenue grew by 13% y-o-y. We understand'' the 800mw co-generation unit installed in July 2010 reduced average fuel cost per kWh by 3% to 4%. We do not discount that Power Seraya's sterling results will continue into 4QFY11 lifting YTLP's FY11 net profit above our RM1 billion estimate. Power Seraya contributed 54% to YTLP's 9MFY11 pre-tax profit.
The RM681 million cash raised from the 15% stake sale in PT Jawa Power will likely go towards bidding for a 1,000mw coal-fired IPP in Indonesia. Also, YES is recording average revenue per user of only RM30 against our FY12 assumption of RM49. With a RM500 million cost base for YES, YTLP is likely to conserve cash.
The government's recently set-up MyPower Corp to review power purchase agreements indicates it is serious about reducing IPP tariffs. We estimate that Paka & Pasir Gudang IPPs generate RM400 million in free cash flows (FCF) per year and contribute half of YTLP's dividends. With this under threat, YTLP is again likely to conserve cash.
We maintain our earnings estimates pending 4QFY11 results but slash our yearly dividend per share (DPS) forecast from 13.1 sen to 9.4 sen.
In rolling forward our discounted cash flow based target price to end-FY12, we now assume a lower 1.3 times regulated capital value (RCV) for Wessex Water (1.5 times previously), the multiple that Li Ka-Shing paid for Northumbrian Water last month. Ascribing a 10% discount for uncertainties surrounding YES' earnings outlook and the Malaysian IPPs, our target price is reduced from RM2.51 to RM2.10. ' Maybank IB Research, Aug 4
This article appeared in The Edge Financial Daily, August 5, 2011.
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