YTL Corp Bhd is positioning itself to become a major dividend player following changes in the diversified group's structure.
“The structure has changed, we've privatised YTL Cement, that's been successful as the parent company, YTL Corp should pay the most in dividends from now on,” managing director Tan Sri Francis Yeoh Sock Ping tells StarBizWeek in an interview.
“Prior to this, we have been paying almost nothing, maybe about 1% yield, ” Yeoh says.
YTL has businesses in an array of sectors including utilities, cement, property, real estate investment, hotels and technology.
By privatising its cement unit, YTL Corp will get a direct sizeable operating business in cement with full access to its net income and cash flows, Yeoh points out.
About RM165mil is expected to be added to YTL Corp's estimated net profit this year from the cement business.
This will automatically enhance YTL Corp's ability to increase dividends.
Earlier this week, YTL Corp announced that it would reward shareholders with treasury shares as part of a dividend payout and would also sell its warrants in another one of its subsidiaries, YTL Power International Bhd at a discount.
The company intends to give away one treasury share for every 15 YTL Corp ordinary shares held.
This share dividend and the proposed offer for sale of warrants coupled with an interim cash dividend of 2 sen per share declared last week, would result in a gross yield for YTL Corp's shareholders of 13.7 sen per share or 7.88% based on the prevailing 5-day market price of RM1.74 per YTL Corp share and RM1.66 per YTL Power share.
“YTL Power pays about a 5% yield, we think it's only right that as the parent, we pay the most in dividends among our stable of companies,” Yeoh says.
YTL Corp's net profit increased 17% to RM364.8mil in its latest quarter ended Jan 31 while revenue stood at some RM5.2bil.
Including YTL Corp, the other three listed entities in the group are YTL Land and Development Bhd, YTL E-Solutions Bhd and YTL Power.
Continuing to expand
“We have about RM14bil cash and are prepared to expand,” Yeoh says.
YTL Corp is used to having a lot of very good business expansion activities every time there is an economic downturn, for example our acquisition of the Hilton Niseko in Japan in 2008, he says.
“The market tends to be overpriced, always too ahead of the curve in buoyant times.
“As patient investors in infrastructure, we always look for a certain internal rate of return, you have to be very patient to get that,” Yeoh says, adding that YTL found good-value assets during times of economic implosion and adjustments.
He counts among such assets, British water utility Wessex Water which was bought from Enron Corp in 2002 for US$1.77bil and Singaporean independent power company PowerSeraya Ltd for S$3.8bil in 2008.
“By the end of this year, we will probably have sales of RM20bil, I think that's the most sizeable turnover for a private company other than Khazanah Nasional-linked companies, so you can see we have grown and are continuing to grow,” he says.
The current RM14bil has “not been put to work” but YTL Corp is looking and have identified some assets, especially in the area of hospitality and retail , Yeoh enthuses.
“Having said that, we are already pouring more money into our cement business, we are going to increase (production) and in two and a half years from now, we are going to add some RM600mil sales and RM200mil profit to the cement division,” he says.
Likewise in terms of mergers and acquisitions (M&A), YTL Corp recently acquired three hotels in Melbourne, Sydney and Brisbane respectively.
“If before we were chasing people for deals, now we are being chased as people are beginning to let go of assets at more realistic prices in view of the global economic problems.
“If they are looking to sell, they have to give potential buyers more realistic yields. We are seeing double-digit yields in hotels in Australia,” Yeoh says.
“China is crumbling a bit too now... we are beginning to see people chasing us there too, China is an interesting space to watch ” he adds.
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