KUALA LUMPUR: CIMB Equities Research expects Yeoh Tiong Lay & Sons Sdn Bhd, which owns 50% stake in YTL Corp, to receive at least RM540mil a year in dividends.
It said on Wednesday YTL’s dividend story has been talked about previously but it is now being put into practice to further support it as one of its top picks.
“The interest of management and minority shareholders are now fully aligned,” it pointed out with the largest shareholder expected to receive the RM540mil in dividends a year.
“For more than two decades, management has been holding back the payout of dividends because its various units needed cash to build itsbusinesses or keep it for M&As. With RM14bil of consolidated cash now on the balance sheet, management and minorities can afford to reap the rewards ofpaying out a large portion of recurring profits indefinitely,” it said.
CIMB Research raised its FY15-17 DPS forecasts from 4 sen to 10 sen following its assessment of YTL’s dividend income stream from its operating units. The sudden pick up in dividends comes from the strong operating performance of YTL Cement and the winding down of its capex cycle, making it the biggest dividend contributor for the group, surpassing that of YTL Power.
It pointed out YTL shares are now offering a yield of 6% which should provide strong valuation support while key catalysts such as the high-speed rail bid and increased cement capacity are coming into view.
“Our FY15-17 EPS forecasts are trimmed from higher net interest expense from the larger dividend payout. Our target price (at RM2.29, based on 20% discount to RNAV) remains unchanged. Add maintained,” it said.