KUALA LUMPUR: Kenanga Investment Bank Research maintained its "market perform" recommendation on YTL Power International Bhd as the market appears to have priced in the weak earnings outlook for the group.
According to the research house, earnings from Wessex Water, PowerSeraya and YES are expected to be weaker while the Paka's Extension PPA contract will expire in June 2021.
In other developments, the 45%-owned oil share-fired Attarat Power Plant in Jordan is expected to be delayed from the scheduled COD in June 2020 while the 80% owned coal-fired PT Jati Power Plant in Indonesia is still working on its financial close, it added.
Meanwhile, the S$331mil acquisition of Tuaspring's assets is expected to concluded soon.
YTL Power's 9MFY20 core profit of RM297.7mil was below Kenanga Research's expectation at 63% of its full-year estimate but exceeded consensus at 88% of its full-year forecast.
The group however experienced a better sequential quarter in 3QFY20 with core profit rising 9% q-o-q to RM102.2mil, despite revenue falling 7% to RM2.59bil.
"Post-results, we cut FY20/FY21 estimates by 14%/11% on higher sewerage costs in 3QFY20 and widened YES losses dampened by price wars," said Kenanga.
Kenanga Research believes the negatives should have been priced in and raised its target price on YTL Power to 65 sen from 57 sen previously as it reverted its valution method to earnings-based sum-of-parts from price-book value.
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