YTL Power risk-reward no longer compelling, says Maybank Invest

KUALA LUMPUR: Maybank Investment Research says YTL Power International Bhd's risk-reward is no longer compelling following a 19% gains since May 25.

The research house downgraded the stock to hold from buy with an unchanged target price of 85 sen.

According to Maybank, the Yeoh family directly acquired about 91 million shares from the market in April and May, an average of about 9% of daily volume. 

"This represents a deviation from past practices, where YTLP would conduct share buybacks
and subsequently distribute treasury shares as stock dividends. The inadvertent read-through would be that of a potential privatisation.

"However we caution that any potential privatisation would likely be in the form of a share swap (into YTL Corp shares), not a cash offer."

The research house added there is no positive progress with regards to Tj Jati A, an Indonesian greenfield coal plant 80%-owned by YTL Power.

"The project has still not achieved financial close, with PPA terms having already been revised (likely downwards) in Mar 2018. Based on management’s original IRR guidance, we estimate the project could have added c.MYR0.45 to our TP.

"However, the repeated delays to achieving financial close point to significant execution challenges to be overcome."