YTL (4677) : YTL Corporation - Let's focus on the HSR
Target RM2.34 (Stock Rating: ADD)
The annualised 1Q15 core net profit made up 66% of our FY6/15 forecast and 65% of consensus. We deem the results broadly in line as the stronger performance of future quarters should be anchored by the cement division, which should offset construction's depleting orders. We maintain our FY15-17 EPS forecasts, but raise our target price as we roll over to end-2015, still pegged to a 20% RNAV discount. We continue to like YTL Corp as it could be the prime beneficiary of the HSR. Investors seeking strong dividend-yielding companies may consider YTL's sustainable 6% dividend yield. Maintain Add. With the tenders of the HSR targeted to commence in 4Q15, we expect progress and newsflow on the HSR to be key catalysts in the medium term.
No major surprises in 1Q
Annualised 1Q15 came in at 66% of our full-year numbers and 65% of consensus. The performance was broadly in line and fairly consistent with the trends exhibited in the past quarters. Future quarters should typically be stronger. The construction division turned around with RM7.1m pretax profit in 1Q15 vs. RM20m losses in 4Q14 and RM3.5m losses in 1Q14. The drag was the 25% yoy decline in utilities' earnings, but this was partially offset by the cement segment. The absence of dividends was expected.
Arguably a strong HSR candidate
Prospects to secure the RM30bn-40bn KL-Singapore high-speed rail (HSR) is good in our view, especially if the private finance initiative (PFI) or public-private partnership (PPP) model is adopted; a more likely option given the government's need to manage the budget deficit. YTL's advantages are its balance sheet strength and express rail track record. The latest indications from the Land Public Transport Commission (SPAD) put 4Q15 as the targeted tender period, suggesting clearer revelations on the execution plans for HSR over the course of 2015. This could spark positive newsflow and the stock's re-rating.
Go for the 6% yield, too
We believe the 6% yield is sustainable and is supported by cash from its various operating units, mainly cement and utilities. FY14's total payout of RM1.3bn translates into an 80% net payout ratio. YTL Corp's dividend yield is the highest compared to the other contractors/infra conglomerates in our coverage.
Source: CIMB Daybreak - 21 November 2014
Target RM2.34 (Stock Rating: ADD)
The annualised 1Q15 core net profit made up 66% of our FY6/15 forecast and 65% of consensus. We deem the results broadly in line as the stronger performance of future quarters should be anchored by the cement division, which should offset construction's depleting orders. We maintain our FY15-17 EPS forecasts, but raise our target price as we roll over to end-2015, still pegged to a 20% RNAV discount. We continue to like YTL Corp as it could be the prime beneficiary of the HSR. Investors seeking strong dividend-yielding companies may consider YTL's sustainable 6% dividend yield. Maintain Add. With the tenders of the HSR targeted to commence in 4Q15, we expect progress and newsflow on the HSR to be key catalysts in the medium term.
No major surprises in 1Q
Annualised 1Q15 came in at 66% of our full-year numbers and 65% of consensus. The performance was broadly in line and fairly consistent with the trends exhibited in the past quarters. Future quarters should typically be stronger. The construction division turned around with RM7.1m pretax profit in 1Q15 vs. RM20m losses in 4Q14 and RM3.5m losses in 1Q14. The drag was the 25% yoy decline in utilities' earnings, but this was partially offset by the cement segment. The absence of dividends was expected.
Arguably a strong HSR candidate
Prospects to secure the RM30bn-40bn KL-Singapore high-speed rail (HSR) is good in our view, especially if the private finance initiative (PFI) or public-private partnership (PPP) model is adopted; a more likely option given the government's need to manage the budget deficit. YTL's advantages are its balance sheet strength and express rail track record. The latest indications from the Land Public Transport Commission (SPAD) put 4Q15 as the targeted tender period, suggesting clearer revelations on the execution plans for HSR over the course of 2015. This could spark positive newsflow and the stock's re-rating.
Go for the 6% yield, too
We believe the 6% yield is sustainable and is supported by cash from its various operating units, mainly cement and utilities. FY14's total payout of RM1.3bn translates into an 80% net payout ratio. YTL Corp's dividend yield is the highest compared to the other contractors/infra conglomerates in our coverage.
Source: CIMB Daybreak - 21 November 2014
