Limited number of Malaysian firms with exposure to UK

Big contribution: Artist’s impression of the Battersea Power Station project in London. The project is expected to contribute RM280mil to SP Setia’s bottom line.

ONLY a limited number of Malaysian public listed companies have exposure to the United Kingdom.

Most of their exposure are mainly in investments via property developments, regulated assets and casino operations.

Chief among them is YTL Power International Bhd.

According to Credit Suisse, most of YTL Power’s existing intrinsic worth lies with Wessex Water, which contributes some 82% of pre-tax earnings.

While this business should remain resilient, future net cashflows to YTL Power could be impacted from any pound weakness, says Credit Suisse.

Any impact on inflation would also affect shareholders’ returns as most of Wessex Water’s bonds outstanding are fixed rate

Meanwhile, Genting Malaysia Bhd is one of the largest casino operators in the UK with over 40 casinos. Credit Suisse estimates that UK operations will only contribute 2.5% of Genting’s 2016 operating earnings versus the peak of 11.2% in 2014.

Credit Suisse is neutral on the stock. Genting Bhd is exposed to the UK via its 49.3% stake in Genting Malaysia. Genting’s operating earnings contribution from the UK in 2016 is less than 1%. Thus Credit Suisse has an outperform rating on Genting.

SP Setia Bhd has a 40% stake in the Battersea project in UK with an estimated gross development value (GDV) of £8.7bil.

Credit Suisse says the first phase is expected to be handed over progressively over a six-month period from December 2016 onwards and the expected contribution to SP Setia’s bottom-line is approximately RM280mil, or 36% of consensus’ FY17 estimates.

Meanwhile Sime Darby Bhd has a 40% stake in the Battersea project. The property division will see associate profit contribution from Battersea in FY17. Credit Suisse estimates that Battersea will make up about 11% of Sime’s net profit.

If the UK economy weakens, the worry is that future launches in Battersea will be adversely affected if the property market remains lacklustre.

Eco World International Bhd (EWI), in which the listed Eco World Development Bhd will eventually hold a 30% stake in upon the former’s listing, has a huge exposure in the UK. As at January 2016, EWI recorded £712mil in property sales.

Through a JV deal with Irish developer Ballymore Group inked last year, EWI is developing three residential projects in London.

EWI owns a 75% stake in EcoWorld-Ballymore, while the Ballymore Group owns the remaining 25% stake.

EcoWorld-Ballymore has sold more than half of the units of the first residential block in its single-largest property project in London – Embassy Gardens Phase 2 as of last month.

Embassy Gardens Phase 2 is one of EcoWorld-Ballymore’s three waterfront development projects in London, the others being London City Island Phase 2 and Wardian London near Canary Wharf.

E&O Bhd ventured into the UK in 2012 when it acquired Princes House in Central London with an estimated GDV of GBP60mil.

This is slated for completion in 2016, in which revenue and profits will be then recognised.

E&O has recently aborted its earlier proposal to list its UK-based property unit on the London Stock Exchange.

Last Jan, E&O purchased two office buildings in London – the 11-storey Thames Towers and 15-storey Landmark House – for £57mil (RM308.94mil).

UK is one of E&O’s four growth engines, besides Greater Klang Valley, Penang and Iskandar Malaysia.

Lastly Scicom (MSC) Bhd as a business process outsourcing (BPO) company, has a small UK exposure at approximately 3% of group revenue based on its latest FY15.