PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
1 March 2010
MARKET DATELINE

YTL Power Share Price

Fair Value
:
:
RM2.16
RM2.12
2Q Net Profit Up 16% YoY Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (YTLPOWR; Code: 6742) Bloomberg: YTLP MK

Net Basic FD FD EPS FD Net
FYE Turnover Profit EPS# EPS# Growth PER C.EPS* P/NTA gearing ROE GDY
Jun (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009a 6,093.4 646.6 15.5 11.5 -12.3 19.1 - 1.9 2.8 10.4 8.0
2010f 10,771.3 1,186.3 20.3 14.9 29.7 14.7 20.4 1.9 2.6 19.0 9.1
2011f 10,997.1 1,221.2 20.9 15.2 1.6 14.5 21.5 1.9 2.5 18.6 9.1
2012f 11,270.1 1,264.8 21.6 15.7 3.4 14.0 23.0 1.8 2.4 18.2 9.1
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC # Excl. EI * Consensus Based On IBES Estimates

♦ Broadly within expectations. YTLP’s 2QFY10 results were broadly within RHBRI Vs. Consensus
our and consensus expectations despite 1H net profit of RM481m (+22% Above
yoy) accounting for around 41% of our and consensus full-year estimates. In Line
1H tends to be a seasonally slower period for Wessex and we expect Below
earnings to pick up sequentially.
Issued Capital (m shares) 6,853.1
♦ PowerSeraya helps mitigate seasonally weaker Wessex Market Cap (RMm) 14,802.8
contribution. QoQ, revenue fell 2% mainly due to seasonal effects at Daily Trading Vol (m shs) 5.0
Wessex as well as a stronger RM (+4.4% vs. GBP). Pre-tax profit, 52wk Price Range (RM) 1.85-2.28
however, grew 8% qoq mainly due to stronger contribution from Major Shareholders: (%)
PowerSeraya and lower interest cost (-12% qoq), which filtered down to
YTL Corporation 51.4
bottomline. We note from the segmental breakdown that the investment
holding and other divisions reported a pre-tax loss of RM19m for 2Q, a EPF 11.5
reversal from the pre-tax profit of RM17m for 1Q. However, it is unclear at
this stage whether this is a reflection of lumpy corporate expenses or FYE Jun FY10 FY11 FY12
startup costs for the WiMAX business. EPS chg (%) - - -
♦ Declares 2nd interim dividend. As expected, YTL Power declared a 2nd Var to Cons (%) 1.2 (0.1) (1.1)
interim tax-exempt (TE) DPS of 3.75 sen (2Q09: 3.75 sen TE). YTD, total
PE Band Chart
net DPS was 7.5 sen (1HFY09: 7.5 sen TE), which translates to a net yield
of 3.5%.
♦ Focus expected to turn to WiMAX roll out in 2HCY10. According to PER = 16x
PER = 13x
press reports, a soft launch of the group’s WiMAX services is scheduled in PER = 10x
Jul, followed by an official launch in Dec. In total, YTL Communications
(YTLC) plans to invest RM2.5bn over five years to roll out its network. We
think the market would be watching the group’s WiMAX development and
strategy. A potential concern here is that YTLC could decide to opt for an
aggressive price strategy in order to win subscribers, especially given that
it would be coming into the market with a largely unutilised nationwide Relative Performance To FBM KLCI
network. Nevertheless, for now, we believe investors would take comfort
that dividend levels have been maintained thus far and we note that the
group’s cash pile has swelled further to RM8bn as at end-Dec from FBM KLCI
RM6.2bn as at end-Sept. Conversion of Warrants 2000/2010 (expired in
Jan 2010) helped fetch around RM900m during the quarter).
YTL Power
♦ Risks. The risks include: 1) unfavourable forex movements, which will
adversely affect the translation of foreign earnings; 2) potential change in
competitive landscape under the National Energy Plan; and 3) execution
risk and poor subscriber numbers for WiMAX.
♦ Forecasts. No change to our forecasts for now. In our model, we have
assumed startup costs for WiMAX would not be significant in FY10 but
imputed operational losses of RM100m p.a. for FY11 and FY12.
♦ Investment case. We have raised our SOP-derived fair value marginally David Chong, CFA
to RM2.12 from RM2.10 after an update for the latest cash and debt (603) 9280 2186
balances as well as share base. Market Perform call, however, is david.chong@rhb.com.my
unchanged.

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Table 2 : Earnings Review

QoQ YoY YoY
FYE Jun (RMm) 2Q09 1Q10 2Q10 (%) (%) 1H09 1H10 (%) Comments
Power Generation 289 2,515 2,506 (0) >100 572 5,021 >100 Higher yoy mainly due to contribution from
PowerSeraya (2QFY09 and 1HFY09: nil).
Water & Sewerage 523 663 604 (9) 15 1,203 1,267 5 Lower qoq mainly on seasonal dip in
volumes and stronger RM (+4.4% qoq vs.
GBP).
Investment Holding 45 26 25 (3) (44) 130 51 (61)
Revenue 289 2,515 2,506 (0) >100 572 5,021 >100

Operating profit 435 507 500 (1) 15 876 1,008 15 1HFY10 stronger yoy due to: 1)
consolidation of PowerSeraya; and 2)
impact of windfall tax provision in 1QFY09,
partly offset by weaker contribution from
Wessex (earnings and exchange rate
effects). QoQ drop largely reflects the
(seasonally) lower contribution from
Wessex.
Interest expense (194) (242) (214) (12) 10 (423) (456) 8 Total debt largely stable qoq at around
RM22.9bn as at end-2QFY10 (vs. 1QFY10:
RM22.4bn; 2QFY09: RM15.7bn).
Associates 43 54 58 8 34 76 112 47
Pre-tax profit 284 319 345 8 21 530 663 25
Tax (69) (88) (94) 7 36 (135) (182) 35
Effec tax rate (%) 24.4 27.6 27.3 25.4 27.5
Minority interest 0 0 0 (100) nm 0 0 nm
Net profit 215 231 250 8 16 395 481 22
Source: Company, RHBRI

Table 3 : Sum Of Parts

RMm RM/share
Domestic power DCF 1,761.6 0.21 DCF at WACC of 6.3%
PT Jawa Power DCF 3,100.7 0.37 35% share of DCF at WACC of 8%
Wessex Water 16,391.9 1.95 1.1x P/RCV plus 10% quality premium at RM6/GBP
PowerSeraya 8,676.0 1.03 Cost of investment
Other 1,209.7 0.14 Investments and other assets at book value
Total 31,139.9 3.71
Less: Net debt (13,365.4) (1.59) Inclusive of cash from warrant conversion
Net NPV 16,781.3 2.12
Source: RHBRI estimates

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Table 4 : Earnings Forecasts Table 5 : Forecast Assumptions

FYE Jun (RMm) FY09a FY10F FY11F FY12F FYE Jun FY10F FY11F FY12F
Power 3,403.1 7,886.9 8,031.6 8,221.0 Power installed capacity (MW)
Water 2,510.7 2,704.4 2,785.5 2,869.1 Paka 808 808 808
Investment Holding 179.6 180.0 180.0 180.0 Pasir Gudang 404 404 404
Turnover 6,093.4 10,771.3 10,997.1 11,270.1 PT Jawa (35%-owned) 1,220 1,220 1,220
PowerSeraya 3,100 3,100 3,100
EBITDA 2,501.9 3,222.1 3,261.1 3,339.4
Margin (%) 41.1 29.9 29.7 29.6 Wessex Water
Dep & Amort (608.6) (804.6) (829.9) (855.2) Revenue growth (%) 4.0 4.0 4.0
Operating profit 1,686.2 2,417.5 2,431.2 2,484.2 EBITDA margin (%) 65.0 63.7 62.4
Other income 93.8 100.0 50.0 50.0 Source: Company data, RHBRI estimates
Interest income 51.8 14.2 14.9 15.7
Interest expense (877.5) (1,165.4) (1,161.6) (1,158.0)
Associates 225.5 194.5 219.6 219.6
Exceptionals 207.0 0.0 0.0 0.0
Pre-tax profit 1,386.9 1,560.9 1,554.2 1,611.5
Tax (740.3) (374.6) (373.0) (386.8)
Minority interest 0.0 0.0 40.0 40.0
Net profit 646.6 1,186.3 1,221.2 1,264.8
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
(previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and
information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to
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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher
risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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subject to the duties of confidentiality, will be made available upon request.

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