YTL eyes new power plant job
THE STAR ONLINE, Mar 20, 2013

WE met up with YTL Power International Bhd's management recently for an update on the company's outlook following the release of its first half of financial year ending June 30, 2013 results.

The highlights included its bid for Project 3B, which comprises a new coal-fired 2x1,000MW power plant in Malaysia , and potential headwinds facing its Power Seraya operations.

We maintain our “neutral” call, with our target price tweaked a tick lower to RM1.50.

YTL Power is looking to participate in the upcoming tender for Project 3B called for by the Energy Commission.

We believe the project, comprising a greenfield coal-fired power plant with 2x1,000MW capacity, presents an opportunity for the group to potentially replenish its IPP (independent power producer) earnings base in the country.

That said, we believe it might have to submit a competitive bid to bag the project, given the intense interest on the job.

Management conceded that its Power Seraya operation would likely see more pricing competition in the medium term. As Singapore 's local authorities are targeting an additional 3,000MW in generation capacity by 2017, we believe that tariff pricing may remain stagnant and even face some downside risks in the near term.

Its WiMAX business currently has 400,000 subscribers. Moving forward, management is likely to focus on implementing its RM4bil 1Bestarinet project awarded by the Government in 2011 to ensure the provision of WiMAX services to 10,000 schools in Malaysia .

We expect the unit, which registered a pre-tax loss of RM137.7mil in the first half of 2013, to break even at the earnings before interest, tax, depreciation, and amortisation level by end-2015.

Following an internal coverage reallocation, we are revamping our earnings model, which leaves our 2013 net profit forecast unchanged at RM1.02bil while our 2014 and 2015 estimates are tweaked up by 0.3% and 4.0% to RM1.12bil and RM1.21bil respectively.

That said, we are relatively cautious on the potential headwinds its Singapore operations may face in the near term, as well as continued losses at its WiMAX division.

Hence, we maintain our “neutral” call with our target price at RM1.50.