YTL hunts for UK assets amid Brexit shock

Yeoh: ‘We have always loved assets like utilities that are long term. Investors like myself buy long term businesses.’

PETALING JAYA: YTL Corp Bhd, the Malaysian conglomerate which snapped up a British utility from the now defunct Enron Corp more than a decade ago, is looking for bargains again after the UK vote to leave the European Union sent assets plummeting, reports Bloomberg.

The report, quoting YTL managing director Tan Sri Francis Yeoh, said the company, one of Malaysia’s biggest investment holding groups with utilities and property in Britain, will look for infrastructure utility assets in the UK over the next two to three years.

Not since 2008 has there been an opportunity for it to scout for assets at attractive prices till now, he said. The company has about RM13.5bil (US$3.3bil) in cash that could be used to fund expansion.

“Assets are already more realistically priced, this time by default rather than design,” Yeoh, the 61-year old managing director of family-owned YTL, said at his penthouse office at the company’s headquarters in Kuala Lumpur.

“We have always loved assets like utilities that are long term.

“Investors like myself buy long term businesses.”

The pound had a record plunge on Friday and the market value for UK stocks shrank the most since at least 2003 following the fallout from the historic vote, sending global markets into a tailspin and threatening prospects for foreign investments there.

While Brexit may prompt overseas companies to steer clear from the UK, Yeoh sees it as an unprecedented opportunity to snap up assets at cheaper prices.

YTL, through its power unit YTL Power International Bhd bought Wessex Water Services Ltd in 2002.

It was its first foray into the European utilities market aimed at widening its business beyond Asia.

The group’s other investments in the UK are the Gainsborough Hotel in Bath and the former Filton airfield in Bristol, where the supersonic Concorde airliner was largely designed and built, according to the British Broadcasting Corp.

YTL has business interests from Australia to China, owning power plants, shopping malls and infrastructure projects.

“I’ve been lamenting the lack of opportunities over the past eight years, and perhaps this, sadly is a trigger for it,” he said.

Acquisitions and investments announced in Europe for the utilities industry amounted to US$21.6bil last year compared to US$76.4bil in 2008, data compiled by Bloomberg showed.

Yeoh said Britain has the best “transparent and coherent” regulatory framework for foreign investments. “I’m not worried about my investments in the UK. We don’t speculate in currencies and eventually it will even out in the long term.”

Also, Brexit could be a catalyst for EU and the world to reform their regulatory framework as the people’s anger largely stems from infrastructure needs that are not addressed quickly enough, he said.

“Immigration would be a huge problem in the future if infrastructure needs are not built. I’m quite sure we will be getting quite busy for the next two or three years, especially now that the opportunity has come back,” he said in the Bloomberg interview.

Meanwhile, CIMB Research noted that while the operations of Wessex Water will not be impacted much by Brexit as it was mainly a localised business that served southwest England, its earnings will be affected due to the weakness in the pound sterling.

“While the economic impact of Brexit may reverberate for years to come, the UK’s economic climate has limited impact on Wessex Water’s earnings as its business is governed by a regulatory framework that enables it to earn a reasonable return on its capital.

“Brexit, however, will affect Wessex Water’s earnings in ringgit terms.

“The movement of the GBP against other currencies may continue to be volatile in the coming weeks and months,” it said in a report yesterday.

CIMB Research estimates that every 5% depreciation in the pound against the ringgit will reduce its FY16-17 forward earnings per share by 5%.

The earnings of Wessex Water had made up 82% of YTL Power’s pretax profit in the first nine months of FY16.

In FY15, it contributed 74% of YTL Power’s profit before tax and accounted for 41% of the group’s total assets.

It became an even more important earnings contributor to YTL Power in the current financial year due to the decline in Singapore Power Seraya Ltd’s earnings and bigger losses in YTL Power’s mobile broadband division, the research house said.

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