Despite the challenging market conditions both in Malaysia and Singapore, YTL Corp said it remained positive that its property offerings across these markets would continue to draw buyers.
KUALA LUMPUR: Affin Hwang Capital Research is maintaining its "hold" call on YTL Corp and lowering its target price to RM1.44 from RM1.70 as profits from the cement operations are on a decline.
The decrease in profit from the segment is "too significant" that the research house is lowering exectations of its dividend per share (DPS) to 7 sen from 12 sen previously in FY17-18E.
"There could also be more downside risks if YTL Power lowers its DPS below 10 sen, as 0.5 sen decline in YTLP’s DPS would lead to a 0.2 sen reduction in YTL’s DPS," it says in its report on Tuesday.
Weak demand in the property segment will pose as a challenge to the cement business in FY17E.
While Affin Hwang Research is expecting higher demand from infrastructure and property in FY18E, it will not be enough to absorb the overcapacity, limiting upside to the earnings recovery.
"Given that more than 30% of our RNAV is derived from its cement operations, changes in the segment will have a significant impact on our RNAV," says Affin Hwang Research.
There could also up upsides from the construction job for the Tanjung Jati "A" power plant project and rail-related infrastructure projects in Malaysia.
The research house expects close to RM120bil of rail-related contracts to be awarded from H2FY17 onwards, although the earnings upside from these contracts would not be enough to offset the overall weaker results.
Affin Hwang Research is cutting its earnings per share (EPS) forecast on YTL by 30% to 34% in FY17-18E.
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