Tenaga Nasional Bhd says the 21-year power purchase agreement with YTL Power Generation Sdn Bhd has expired on Sept 30, 2015.
KUALA LUMPUR: YTL Corporation’s core net profit for the first quarter ended Sept 30, 2018 (1Q 19) made up 15% of CIMB Equities Research’s FY6/19F forecast and 16% of consensus.
It said on Monday the results were below expectations due to lower earnings from property development and utilities.
Although construction revenue surged strongly on-year, pretax profit and margin contribution from construction was still miniscule.
Overall operating cost also grew faster (+9.8% on-year) than revenue’s +4.3% on-year. Overall EBITDA margin slipped from 29% in 1Q18 to 25% in 1Q19. 1Q19 net profit contracted 11% on-year.
However, CIMB Research pointed out YTL Corp’s cement’s overseas operations bucked the trend.
The biggest earnings contributors in 1Q19 were the cement, property/REIT and utilities segments though pretax profit for all three divisions dropped by 2.2%-54% on-year.
The big decline in property/REIT was on account of weak property sales due to the scaling back of launches.
China’s supply side reform benefited cement’s earnings in terms of higher domestic selling prices, which buffered the impact of price competition on the Malaysian cement operations (still profitable in spite of the sector’s oversupplied state).
CIMB Research also said the Gemas-Johor Bahru Electrified Double-Tracking (EDT) project would now cost 15%-20% less than the original RM9.4bil value awarded.
“YTL-SIPP JV has emerged as the turnkey contractor. This remains positive for order book though we believe earnings contribution in FY19-20F would not be as strong as we previously forecasted, in light of the slow progress.
“In 1Q19, construction pretax profit stood at RM600,000 (up 29% on-year),” it said.
CIMB Research cut its FY19-21F EPS forecasts by 12%-19% as it: 1) lower its profit recognition assumptions for Gemas-JB EDT, 2) assume lower property sales on the back of the scaling back of launches, and 3) factor in the 13-14% EPS cuts for YTL Power’s FY19-21 earnings – YTL owns a 53% stake in YTL Power.
“We now expect higher margin construction profit from Gemas-JB EDT to flow through earnings from FY21F onwards.
“We cut RNAV/share by 14% from RM2 to RM1.72 as we factor in YTL Power’s lower target price of RM1.04, lower market capitalisation of listed entities, lower six times EV/EBITDA multiple for cement due to the weaker overall market conditions, and lower construction profit.
“We roll over to end-CY19 and still peg our lower RM1.21 TP to a 30% discount to RNAV. Upside risk is a revival of the HSR job and stronger Gemas-JB project.
“Maintain Hold with a lower RM1.21 TP,” it said, compared with the previous RM1.40. Thelast traded price was RM1.15.
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