PETALING JAYA: YTL Corp Bhd
offers one of the highest dividend yields among the constituent stocks of the FTSE Bursa Malaysia KL Composite Index, noted MIDF Research in initiating coverage on the conglomerate.
MIDF Research said YTL had caught investors by surprise with its generous dividend of 12 sen per share in 2014, which translated into a payout ratio of about 80%.
“We attribute this to its rich cashflow generation. Assuming a similar payout ratio, we account for a dividend payout of about 10 sen, implying a dividend yield of 6%,” the research house said in its report yesterday.
However, MIDF Research added that given the lack of immediate catalysts for the stock, its share price – which currently is trading close to its five-year rolling average price earnings (PE) range - was fair in terms of valuation.
It pointed out that although YTL’s earnings base was well-supported by exposure to defensive sectors via its utilities business operation, the group lacked clarity on its future plans. “There is a lacklustre element in YTL’s share price performance after having surged to a high of RM2.12 in June 2012.
“We believe that the appreciation in the share price then was mainly driven by the privatisation of YTL Cement, undertaken via a share-swap exercise,” said MIDF Research, adding that since then, the price has retraced and moved sideways.
Known as the first independent power producer with diversified business operations abroad, MIDF Research is of the opinion that YTL’s potential share price gain is limited at the moment.
The counter had surged to a record high of RM2.12 on June 20, 2012 and was at its lowest of RM1.20 on Aug 9, 2011, according to Bloomberg data.
MIDF Research has initiated a “neutral” call on the stock, with a target price of RM1.68 per share based on a sum-of-parts valuation methodology, which implies a forward PE of 13 times for financial year 2016.
YTL closed down two sen or 1.2% to RM1.65 yesterday on a volume of 2.8 million shares. The stock has a market capitilisation of RM17.40bil.
