24 February 2017 | 2QFY17 Results Review
Maintain NEUTRAL
YTL Corporation Berhad
Revised Target Price (TP): RM1.30
(from RM1.50)
Utilities improved, excess capacity for cement
INVESTMENT HIGHLIGHT
•
YTL’s 1HFY17 earnings of RM298m missed estimates
•
Cement division still facing excess capacity and price
RETURN STATS
competition
Price (23 Feb 2017)
1.55
Target Price
1.30
•
Utilities division saw improvements on sequential basis
•
Maintain
NEUTRAL
at
a
lower
SOP-derived
TP
of
RM1.30/share (from RM1.50/share)
Missed estimates. YTL reported net profit of RM148m for its 2QFY17,
bringing 1HFY17 earnings to RM298m. This is below expectations
accounting for 30% of our FY17F (no consensus estimate available).
2QFY17 earnings were largely flat quarter-on-quarter, but the shortfall
against our forecast came from weaker than expected cement earnings.
Utilities unit improved. YTL’s utilities division (accounts for 63% of
group pretax) delivered improved results, particularly from Power
Seraya. Despite the overcapacity in Singapore power generation,
earnings improved 69%qoq mainly due to lower interest and operating
expense, while revenue also grew by 9%qoq. Rates would have
stabilised given that the last major capacity addition was in 1Q16 i.e.
Hyflux’s ~400MW Tuaspring plant, but gencos have committed to longterm, take-or-pay piped gas supply from Indonesia and Malaysia up till
2020, which means players are unlikely to adjust generation
meaningfully in the near-term to balance supply-demand.
Power Seraya benefits from vesting volumes sold to Singapore Power
Services as this is on a cost plus basis, hence guarantees profit margins
which is valuable in the current situation. Only the three largest gencos
get to contribute to vesting volumes, which accounts for at least 25% of
demand in the country. Other than this, Power Seraya is also supported
by non-power businesses (accounts for ~4% of revenue) e.g. steam
supply which comes at almost no additional cost as this is a by-product
of its existing power plants.
Non-utilities business. The property investment and development
division saw improvements in earnings given better site progress from
The Fennel project. Higher pretax sequentially was mainly due to a fair
value loss on investment property last quarter. Meanwhile, the
construction unit saw better earnings (+37%qoq) as a result of
improved margins and higher revenue recognition of construction
contracts. The cement unit is facing short-term margin pressure as the
industry faces temporary excess capacity and price competition.
Forecasts trimmed. We trim our FY17F18F earnings by 36%/35% to
factor in mainly lower cement volume and margin forecast given the
competitive environment currently.
Expected Share Price
Return
-16.1%
Expected Dividend Yield
+6.2%
Expected Total Return
-9.9%
STOCK INFO
KLCI
1705.91
Bursa / Bloomberg
4677 / YTL MK
Board / Sector
Main / Conglo
Syariah Compliant
No
Issued shares (mil)
10,418.6
Par Value (RM)
Market cap. (RM’m)
Price over NA
0.10
16,118.87
1.07
52-wk price Range
RM1.44-RM1.82
Beta (against KLCI)
0.71
3-mth Avg Daily Vol
7.29m
3-mth Avg Daily Value
RM11.1m
Major Shareholders
YEOH TIONG LAY & SON
48.8%
DEUTSCHE BANK AG/SIN
9.9%
Recommendation. We maintain our NEUTRAL call but lower our TP to
RM1.30/share from RM1.50/share. FY17F 6.5% dividend yield is
attractive however.
MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT
BANK
Kindly refer to the last page of this publication for important disclosures
MIDF RESEARCH
Friday, 24 February 2017
INVESTMENT STATISTICS
FYE Jun
Revenue
EBIT
Pretax Profit
Minority Interest
Net profit
EPS (sen)
EPS growth
PER (x)
Dividend
Dividend yield (%)
2013
20,033.1
2,921.7
2,299.4
(564.2)
1,266.7
12.2
NA
12.7
2.5
1.6
2014
19,269.2
3,685.7
2,811.6
(1,050.0)
1,555.0
15.0
22.8%
10.3
12.0
7.7
2015
16,821.6
3,230.2
2,365.9
(689.8)
1,069.7
10.3
-31.6%
15.1
9.5
6.1
2016
15,370.0
2,939.5
2,269.0
961.3
913.7
9.9
-3.9%
15.7
9.5
6.1
2017F
16,776.6
2,428.7
1,331.9
(329.6)
669.3
6.5
-34.6%
24.0
9.7
6.2
2018F
17,234.1
2,574.9
1,456.7
(360.5)
732.0
7.1
9.4%
21.9
10.6
6.8
Source: Company, MIDFR
EXHIBIT 1: YTL 2QFY17 RESULTS REVIEW
FYE Jun
2Q16
1Q17
Revenue
EBIT
Finance cost
Associates
PBT
Tax
Minority Interest
Net profit
Core net profit
EPS (sen)
GDPS (sen)
EBIT margin
Pretax margin
Tax rate
Net profit margin
2Q17
YoY
QoQ
1H16
1H17
YTD
3,938.4
834.9
(343.6)
103.6
594.9
(141.9)
218.0
234.9
170.1
3,492.2
568.4
(306.6)
84.5
346.3
(83.1)
112.8
150.3
150.3
3,622.1
613.9
(315.3)
103.4
402.0
(93.1)
161.3
147.7
147.7
-8.0%
-26.5%
-8.2%
-0.2%
-32.4%
-34.4%
-26.0%
-37.1%
-13.2%
3.7%
8.0%
2.8%
22.5%
16.1%
11.9%
42.9%
-1.8%
-1.8%
8,386.8
1,551.5
(683.8)
202.1
1,069.7
(297.5)
334.7
437.5
423.3
7,114.2
1,182.3
(621.9)
187.9
748.3
(176.2)
274.1
298.0
298.0
-15%
-24%
9%
-7%
-30%
41%
-18%
-32%
-30%
2.27
0.00
1.45
0.00
1.43
0.00
-37.1%
NA
-1.8%
NA
4.22
0.00
2.88
0.00
-32%
NA
21.2%
15.1%
23.9%
6.0%
16.3%
9.9%
24.0%
4.3%
16.9%
11.1%
23.1%
4.1%
18.5%
12.8%
27.8%
5.2%
16.6%
10.5%
23.5%
4.2%
Source: Company, MIDFR
2
MIDF RESEARCH
Friday, 24 February 2017
EXHIBIT 2: YTL 2QFY17 RESULTS BREAKDOWN
Segmental Breakdown
2Q16
1Q17
2Q17
YoY
QoQ
1H16
1H17
YTD
Revenue (RMm):
Construction
IT & e-commerce related
business
Cement manufacturing
Property investment &
development
Management services & others
Hotels
Utilities
3,938.4
26.8
3,492.2
22.4
3,622.1
31.1
16.1%
38.8%
8,386.8
56.7
7,114.2
53.6
-5%
1.3
0.9
1.4
6.1%
56.2%
2.2
2.3
1%
724.9
575.8
624.9
-13.8%
8.5%
1,434.2
1,200.7
-16%
260.6
266.9
270.0
3.6%
1.2%
488.8
536.9
10%
140.7
232.5
2,551.6
109.3
220.5
2,296.4
46.8
233.7
2,414.1
-66.7%
0.5%
-5.4%
-57.1%
6.0%
5.1%
254.5
432.1
5,718.3
156.1
454.3
4,710.5
-39%
5%
-18%
PBT (RMm):
Construction
IT & e-commerce related
business
Cement manufacturing
Property investment &
development
Management services & others
Hotels
Utilities
594.9
(7.2)
346.3
8.8
402.0
12.0
NA
36.7%
1,069.7
0.3
748.3
20.8
>500%
0.9
0.2
1.1
30.0%
655.9%
1.4
1.3
-10%
165.9
74.9
96.4
-41.9%
28.7%
283.7
171.4
-40%
90.1
38.4
78.4
-13.1%
104.1%
149.4
116.7
-22%
(75.3)
25.4
395.0
8.5
13.7
201.8
(73.8)
34.6
253.3
NA
36.0%
-35.9%
NA
152.4%
25.5%
(28.6)
13.4
649.9
(65.2)
48.2
455.1
128%
259%
-30%
-26.9%
39.2%
38.6%
0.5%
38.8%
68.3%
17.3%
83.7%
64.8%
57.8%
22.9%
13.0%
15.4%
19.8%
14.3%
34.6%
14.4%
29.0%
30.6%
21.7%
-53.5%
10.9%
15.5%
7.8%
6.2%
8.8%
157.5%
14.8%
10.5%
-11.2%
3.1%
11.4%
-41.8%
10.6%
9.7%
PBT margin
Construction
IT & e-commerce related
business
Cement manufacturing
Property investment &
development
Management services & others
Hotels
Utilities
Source: Company, MIDFR
3
MIDF RESEARCH
Friday, 24 February 2017
DAILY PRICE CHART
Source: Bloomberg
Hafriz Hezry
[email protected]
03-2772 1679
4
MIDF RESEARCH
Friday, 24 February 2017
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
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distribution only under such circumstances as may be permitted by applicable law.
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implied, as to the accuracy, completeness or reliability of the information contained therein and it should
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This report is not, and should not be construed as, an offer to buy or sell any securities or other
financial instruments. The analysis contained herein is based on numerous assumptions. Different
assumptions could result in materially different results. All opinions and estimates are subject to change
without notice. The research analysts will initiate, update and cease coverage solely at the discretion of
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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Total return is expected to be <-15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
5