RHB upgrades YTL Power to 'buy', TP increased to 95 sen

  • Analyst Reports
  • Friday, 21 Feb 2020

KUALA LUMPUR: YTL Power Bhd received a business viability guarantee letter for Tanjung Jati and is confident of achieving financial close very soon, which could lead to a re-rating catalyst for the stock, says RHB research.

The research house upgraded YTL Power to a buy call from neutral with a higher target price of 95 sen from 73 sen previously after imputing the valuation for the Tanjung Jati plant at 19 sen per share.

According to the research house, the group received the business viability letter for the 80%-owned Tanjung Jati 2x660MW coal-fired power plants in Java from the Indonesia Finance Ministry.

"Recall that YTLP raised MYR2.5bn in sukuk in Apr 2017, and the net gearing position is expected to increase from the current 1.7x level if the Tanjung Jati project is kick-started.

"We are not overly concerned about elevated net gearing, given that the bulk of the debt is backed with contracts, ring-fenced, and with non-recourse to the group," it said.

However, the research house cut the group's earnings forecast for FY20-22 by 11-14% on the back of lower contributions from the telecoms segment.

Weaker-than-expected losses in the telecoms segments resulted in a weaker first half of YTL Power's financial year.

For 1HFY20, YTL Power posted a core net profit of RM84mil, which was 47% lower year-on-year and 8% higher quarter-on-quarter. The result missed RHB's and consensus estimates, coming in at 40% and 44% of full-year forecast respectively.
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