YTLPOWR (6742) - YTL Power International - Wessex Water leads the way
Target RM2.04 (Stock Rating: ADD)
YTL Power's 2Q15 core net profit of RM254.9m brought its 1H15 core net profit to RM489m. This is broadly in line with our expectations at 47% and 45% our and consensus forecasts, respectively. We consider this to be line as we expect earnings from its investment-holding activities to improve on the back of stronger forex. PBT grew by 12.8% yoy on the back of a 17.5% yoy decline in revenue. The decline in revenue was offset by lower operating costs and higher associates contribution, resulting in improved earnings. We make no changes to our earnings forecasts. However, our SOP-based target price for YTL Power is reduced to RM2.04/share, after we reduced our target EV/MW for Power Seraya to 1x (from 1.3x previously) in light of its declining revenues and margins. We maintain our Add call on the stock.
2Q15 results review
YTL Power's 2Q15 revenues fell by 19.4% yoy due to a 27% yoy decline in Power Seraya's revenues as fewer units of electricity were sold while oil trading revenues were weaker during the quarter. PBT growth of 6.2% yoy was driven by Wessex Water and YTL Power's investment-holding division. Wessex Water’s PBT rose 18.3% yoy on the back of 5.7% yoy revenue growth. Similarly, for the 1H of FY15, revenue declined by 17.5% yoy as Power Seraya's revenue during the period fell by 25.5% yoy while its PBT slid by 47% yoy due to weaker margins on its retail contracts. YTL Power's investment-holding division's PBT saw an improvement to RM58.8m as opposed to losses of RM162m in 1H14.
Wimax losses persist
YTL Power's WiMax division continues to make losses, with accumulated 1H pretax losses of RM127.9m, higher than 1H14’s losses of RM77.9m. This was on the back of a 21% yoy revenue decline. The fall in revenue was mainly due to lower project sales. We believe that the losses will persist given the division's declining revenues.
Malaysian IPP extension not likely
Our SOP-based target price for YTL Power is reduced to RM2.05 after we reduced our target EV/MW for Power Seraya to 1x (from 1.3x previously) in light of its declining revenue and margins. The outlook for Power Seraya would remain challenging as the increased generation capacity in Singapore market has added pressure to revenue and margins.
Source: CIMB Daybreak - 16 February 2015
Target RM2.04 (Stock Rating: ADD)
YTL Power's 2Q15 core net profit of RM254.9m brought its 1H15 core net profit to RM489m. This is broadly in line with our expectations at 47% and 45% our and consensus forecasts, respectively. We consider this to be line as we expect earnings from its investment-holding activities to improve on the back of stronger forex. PBT grew by 12.8% yoy on the back of a 17.5% yoy decline in revenue. The decline in revenue was offset by lower operating costs and higher associates contribution, resulting in improved earnings. We make no changes to our earnings forecasts. However, our SOP-based target price for YTL Power is reduced to RM2.04/share, after we reduced our target EV/MW for Power Seraya to 1x (from 1.3x previously) in light of its declining revenues and margins. We maintain our Add call on the stock.
2Q15 results review
YTL Power's 2Q15 revenues fell by 19.4% yoy due to a 27% yoy decline in Power Seraya's revenues as fewer units of electricity were sold while oil trading revenues were weaker during the quarter. PBT growth of 6.2% yoy was driven by Wessex Water and YTL Power's investment-holding division. Wessex Water’s PBT rose 18.3% yoy on the back of 5.7% yoy revenue growth. Similarly, for the 1H of FY15, revenue declined by 17.5% yoy as Power Seraya's revenue during the period fell by 25.5% yoy while its PBT slid by 47% yoy due to weaker margins on its retail contracts. YTL Power's investment-holding division's PBT saw an improvement to RM58.8m as opposed to losses of RM162m in 1H14.
Wimax losses persist
YTL Power's WiMax division continues to make losses, with accumulated 1H pretax losses of RM127.9m, higher than 1H14’s losses of RM77.9m. This was on the back of a 21% yoy revenue decline. The fall in revenue was mainly due to lower project sales. We believe that the losses will persist given the division's declining revenues.
Malaysian IPP extension not likely
Our SOP-based target price for YTL Power is reduced to RM2.05 after we reduced our target EV/MW for Power Seraya to 1x (from 1.3x previously) in light of its declining revenue and margins. The outlook for Power Seraya would remain challenging as the increased generation capacity in Singapore market has added pressure to revenue and margins.
Source: CIMB Daybreak - 16 February 2015
