|Good time for YTL to buy cut-price assets|
The Edge Malaysia, October 20, 2008
By Lim Shie-Lynn
Acquiring cut-price assets has become a signature of the YTL group, which is controlled by the Yeoh family. When the tech bubble burst in 2000, for instance, YTL ventured into the transmission business. It purchased a 33 % stake in ElectraNet, which operates the South Australian transmission network, via YTL Power International Bhd. YTL Corp Bhd holds a 52.8% stake in YTL Power.
As the global financial crisis extends its reach from
"With economies worldwide tumbling into uncertainty and liquidity problems afflicting financial markets, this is a good time for YTL to step in and buy assets. It would not be a problem for cash-rich YTL Corp," says a fund manager.
The political uncertainties that continue to cloud the domestic business landscape have spurred the YTL group to seek property development projects in
The property sale launch came after YTL's third successful bid last year for the en bloc purchase of 50 high-end residential units of the Westwood apartments located on Singapore's Orchard Boulevard for RM1 billion.
YTL Corp won its maiden bid in the republic via the Lakefront Collection bid worth US$100 million in September 2006. In March last year, YTL and its partner, LP World Sdn Bhd, made a successful bid for
The utilities arm of the YTL group also looked to the republic to acquire another regulated asset for an earnings boost. While YTL Power lost the bid for Senoko Power, one of three power generation plants held by Singapore's sovereign wealth fund Temasek, analysts opine that the oldest independent power producer in the country has sufficient cash, amounting to RM9 billion, to bid for regulated assets worldwide. A consortium led by Japanese firm Marubeni won the bid for Senoko Power.
YTL Power's other overseas assets in utilities are Indonesia-based PT Jawa Power, UK-based Wessex Water and ElectraNet in Australia. The 2002 acquisition of Wessex Water marked the group's foray into
It is, however, unlikely for YTL to acquire more water assets in the
The water-transfer project signed by Pahang Menteri Besar Datuk Seri Adnan Yaakob and former Selangor Menteri Besar Datuk Seri Dr Mohamad Khir Toyo, would channel raw water to Selangor, which is expected to face supply problems by 2015.
Prudent management, defensive stock
Although both the shares of YTL Corp and YTL Power have shed more than 20% since the beginning of the year, analysts opine that YTL Power is the more defensive stock. This could also be due to the fact that both YTL Corp and YTL Power have engaged in active share buyback programmes, which help to limit the downside to their stocks.
A check with
The continuing drop in the ringgit has worked in favour of YTL Power, says AmResearch, as a weakening ringgit translates to higher earnings recognition from Wessex Water. "The foreign loans have a natural hedge against YTL Power's overseas operations," the research firm adds. Shares of YTL Power closed three sen lower at RM1.71 last Thursday, while YTL Corp was 10 sen lower at RM5.85.