Saturday August 18, 2012
Non-power businesses and robust local economy should boost YTL
By LIZ LEE
PETALING JAYA: Having just announced its full-year financial results, YTL Corp Bhd is said to likely sustain its positive earnings entering its new financial year buoyed by stable non-power businesses and robust domestic economy.
An analyst covering the group said that YTL Corp should be able to hold up positive financial performances although its power operations would remain a challenge.
“My take is that the group would do better. What is dragging on its earnings now is its YES mobile broadband business which at the moment is running at a lost due to high capex,” he said.
However, the analyst expects the losses to narrow in the next two to three years because “the revenue from that business stream should be growing as they up the penetration rate and grow their subscriber base.”
Moreover, he pointed out that consolidation of YTL Cement's profit and loss since it had been privatised would likely benefit the group.
“In terms of sales, YTL Cement will grow in tandem with other players in the industry due to the rising demand for cement coming from long-term construction projects,” he said.
“YTL Cement with its 9% market share can expect its profits to go up and there will be added upside if they choose to raise cement prices,” the analyst added.
That said, YTL could continue facing challenges on the utilities front as the asset-heavy business would have “financing costs that are harder to predict as the business takes on a lot of debt to fund its capex”.
Affin Research analyst believes that YTL Corp will continue to expect growth as the underlying economy is robust for Malaysia.
On Thursday, YTL Corp announced a 9.8% increase in its FY12 net profit at RM1.135bil while revenue grew by 11.4% to RM20.44bil. Following the announcement, group managing director Tan Sri Francis Yeoh Sock Ping said in a statement that the growth was driven mainly by the multi-utilities, cement and property development businesses.
Affin Research noted that YTL Corp's fourth-quarter profit before tax fell 15.7% from a year ago and 24.7% from a quarter ago to RM523.2mil due to cost pressures experienced by YTL Power.
However, that loss was partly offset by resilient YTL Cement earnings contribution and higher progress billing from YTL Land's projects Capers, Sentul Raya and Lakefields as well as from the unlisted construction arm.
The research house had estimated YTL Corp's FY12 core net profit to surge 13.8% year-on-year to RM1.177bil on stronger performance from YTL Cement, management services and higher progress billing from the construction and property division.
“This helped offset weak YTL Power earnings stream due to higher cost across PowerSeraya, WessexWater and Malaysian independent power producers whilst YES losses widened from RM280.2mil in FY11 to RM309.8mil in FY12,” it reported.
As for YTL's increased dividend trend for the financial year, analysts believe that the conglomerate will carry out its intention to step up dividend payout.
“They have been alluding to that and it seems they would follow through,” the Affin Research analyst said.
Another analyst said that with recent the privatisation of YTL Cement and another possibly on YTL Power, the group may look into non-cash rewards.