YTL Corp Bhd may buy utilities in Europe, Asia and Australia to ensure profit growth of 20% a year till 2020, said managing director Tan Sri Francis Yeoh.
YTL, with a RM6.2bil war chest, expects interest rates to rise, forcing financially troubled companies to sell assets more cheaply. The group, which bought Britain-based Wessex Water Plc for US$1.77bil in 2002, may be interested in assets such as Edison International’s plants in Australia, Asia and Europe and National Grid Transco Plc’s gas distribution units in England and Wales, Yeoh said.
“Right now, I would say it’s the wrong time to bid for utilities,” he said in an interview in Kuala Lumpur. “But within a calendar year from now, there will be a huge restructuring in the world economy. Interest rates are going to go up.”
YTL, with interests in power, water, property, hotels, information technology, cement and construction, is seeking revenue from beyond Malaysia.
Wessex contributed more than two-fifths of the group’s total sales in the year ended June 2003 and boosted YTL’s profits by 42% to RM515.1mil. YTL’s net profit growth for the year ending June 2004 will be more than 60%, matching the growth rate of the first half of the fiscal year, Yeoh said.
“Average growth of 20% is highly commendable,” said Joe Wong, who manages the equivalent of about US$39mil at Easset Management Sdn Bhd. “I personally think he (Yeoh) is doing the right thing. There’s no point buying anything with the potential of other currencies weakening.”
Australia’s central bank raised rates in November and December last year to slow home borrowing and consumer spending. And in Britain, the central bank increased its benchmark lending rate twice in the previous five months.
Ian Macfarlane, governor of the Reserve Bank of Australia, expects some countries, including the United States, to raise interest rates to “a more normal level” within the next year.
YTL shares may be moving too slowly for some investors. The stock’s 6.5% gain this year has lagged the benchmark index’s 9.8% rise.
“It is a conservative strategy and could be seen as moving too slowly from a shareholder point of view,” said Raymond Tang, who helps manage US$237mil in equities at CMS Dresdner Asset Management Sdn Bhd.
“To win more investors, YTL would need to demonstrate that it can get contracts under a new open bidding system” which the Malaysian government has said it is planning to implement,’’ he added.
CMS Dresdner does not hold YTL shares. – Bloomberg
Did you find this article insightful?