Stock Name: YTLPOWR
Company Name: YTL POWER INTERNATIONAL BHD
YTL Power International Bhd
(Oct 13, RM1.76)
Upgrade to buy from hold at RM1.69 with target price of RM2.02: YTL Power International's (YTLP) share price has slipped to attractive levels implying net dividend yields of 5.5%, or more than 10% above the historical average and only 1.3 times 1-year forward price-to-book value (P/BV), an 8'' year low below even the global financial crisis (GFC) trough of 1.6 times in October 2008. This devaluation is despite its relatively resilient earnings base. Therefore, we maintain our discounted cash flow-based target price of RM2.02 but upgrade our call from 'hold' to 'buy'.
Since our last report on Aug 29, 2011, YTLP's share price slipped by 11%. Its share price of RM1.89, then already implied an attractive 5% net dividend yield but its current price of RM1.69, implies an even higher 5.5% net dividend yield (13-year average: 5%). Our FY12 dividend per share estimate of 9.4 sen, assumes 1QFY12 DPS of 3.8 sen and 2QFY12 to 4QFY12 DPS of 1.9 sen per quarter. Even if YTLP continues declaring quarterly DPS of only 1.9 sen, its current price implies a still attractive net dividend yield of 4.4%.
Earnings-wise, we gather that only PowerSeraya (PS ' 58% of FY11 pre-tax profit) is vulnerable to recession. During the FY09 GFC, PS' generation sales contracted by 6% year-on-year (y-o-y). We estimate that should PS' generation sales contract by 6% y-o-y again due to another recession, our earnings estimates will be negatively impacted by only 5%. Therefore, YTLP should be able to sustain a quarterly DPS of 1.9 sen.
YTLP is currently trading at only 1.3 times one-year forward P/BV, the lowest since May 2003 and even below the GFC trough of 1.6 times in Oct 2008. Coupled with our earlier analysis that its current net dividend yields are above their historical average, this suggests that there is very little downside risk to YTLP's share price.
We maintain our earnings estimates and discounted cash flow-based target price of RM2.02 but upgrade our call from 'hold' to 'buy' as deep value is emerging with little downside risk. We would not be surprised if YTLP's shareholders embark on corporate exercises to capitalise on its currently attractive valuations. Also, we understand that it is studying the possibility of acquiring distressed utility assets in Europe, providing another re-rating catalyst. ' Maybank IB Research, Oct 13
This article appeared in The Edge Financial Daily, Ocotber 14, 2011.
Company Name: YTL POWER INTERNATIONAL BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 2.02 |
YTL Power International Bhd
(Oct 13, RM1.76)
Upgrade to buy from hold at RM1.69 with target price of RM2.02: YTL Power International's (YTLP) share price has slipped to attractive levels implying net dividend yields of 5.5%, or more than 10% above the historical average and only 1.3 times 1-year forward price-to-book value (P/BV), an 8'' year low below even the global financial crisis (GFC) trough of 1.6 times in October 2008. This devaluation is despite its relatively resilient earnings base. Therefore, we maintain our discounted cash flow-based target price of RM2.02 but upgrade our call from 'hold' to 'buy'.
Since our last report on Aug 29, 2011, YTLP's share price slipped by 11%. Its share price of RM1.89, then already implied an attractive 5% net dividend yield but its current price of RM1.69, implies an even higher 5.5% net dividend yield (13-year average: 5%). Our FY12 dividend per share estimate of 9.4 sen, assumes 1QFY12 DPS of 3.8 sen and 2QFY12 to 4QFY12 DPS of 1.9 sen per quarter. Even if YTLP continues declaring quarterly DPS of only 1.9 sen, its current price implies a still attractive net dividend yield of 4.4%.
Earnings-wise, we gather that only PowerSeraya (PS ' 58% of FY11 pre-tax profit) is vulnerable to recession. During the FY09 GFC, PS' generation sales contracted by 6% year-on-year (y-o-y). We estimate that should PS' generation sales contract by 6% y-o-y again due to another recession, our earnings estimates will be negatively impacted by only 5%. Therefore, YTLP should be able to sustain a quarterly DPS of 1.9 sen.
YTLP is currently trading at only 1.3 times one-year forward P/BV, the lowest since May 2003 and even below the GFC trough of 1.6 times in Oct 2008. Coupled with our earlier analysis that its current net dividend yields are above their historical average, this suggests that there is very little downside risk to YTLP's share price.
We maintain our earnings estimates and discounted cash flow-based target price of RM2.02 but upgrade our call from 'hold' to 'buy' as deep value is emerging with little downside risk. We would not be surprised if YTLP's shareholders embark on corporate exercises to capitalise on its currently attractive valuations. Also, we understand that it is studying the possibility of acquiring distressed utility assets in Europe, providing another re-rating catalyst. ' Maybank IB Research, Oct 13
This article appeared in The Edge Financial Daily, Ocotber 14, 2011.
No comments:
Post a Comment