YTL (4677) - YTL Corporation - All eyes on the HSR in 2015
Target RM2.34 (Stock Rating: ADD)
YTL Corp's annualised 1H15 core net profit made up 70% of our and 74% of consensus full-year forecasts. The results were broadly in line as 2H should be seasonally stronger, driven by the cement segment (which should mitigate the weaknesses in other divisions). There were no major surprises in overall operational performance, with sustained EBITDA margin support from the cement and property units. We expect more clarity on the RM30bn-40bn KL-Singapore HSR over the course of this year as the project is crucial to trigger a turnaround in construction losses. We retain our EPS forecasts and target price, still pegged to a 20% RNAV discount. Maintain Add. Key potential catalysts are more newflow on the HSR project in 2H15.
1H15 broadly in line
Annualised 1H15 core net profit made up 70% of our full-year forecast and 74% of consensus’. The performance was broadly in line as 2H should be seasonally stronger, with margin support coming mainly from the cement and property divisions, which constituted 46% of pretax profit in 1H. In spite of the continued stiff competition in the domestic cement market, its cement margins stayed flat yoy. The absence of dividends was no surprise.
Cement as support to earnings, HSR as catalyst
Cement’s contribution to YTL Corp’s bottomline has grown to almost one-third in FY13 and we expect it to rise further given the 30% increase in capacity. The domestic industry continues to be highly competitive. But YTL Cement is well positioned, thanks to its high operating margins, backed by high-end projects and the group's premium product mix. Separately, its prospects of securing the RM30bn-40bn KL-Singapore high-speed rail (HSR) project are still good, in our view, especially if the private finance initiative (PFI) or public-private partnership (PPP) model is adopted. The Land Public Transport Commission (SPAD) has put 4Q15 as the targeted tender period, suggesting clearer revelations on the execution plans for HSR over the course of 2015.
Attractive dividend yield
We believe YTL Corp’s 6% yield is sustainable and is supported by cash from its various operating units, mainly cement and utilities. FY14's total payout of RM1.3bn translates into an 80% net payout ratio. YTL Corp's dividend yield is the highest among the contractors/infra conglomerates in our coverage.
Source: CIMB Daybreak - 12 February 2015
Target RM2.34 (Stock Rating: ADD)
YTL Corp's annualised 1H15 core net profit made up 70% of our and 74% of consensus full-year forecasts. The results were broadly in line as 2H should be seasonally stronger, driven by the cement segment (which should mitigate the weaknesses in other divisions). There were no major surprises in overall operational performance, with sustained EBITDA margin support from the cement and property units. We expect more clarity on the RM30bn-40bn KL-Singapore HSR over the course of this year as the project is crucial to trigger a turnaround in construction losses. We retain our EPS forecasts and target price, still pegged to a 20% RNAV discount. Maintain Add. Key potential catalysts are more newflow on the HSR project in 2H15.
1H15 broadly in line
Annualised 1H15 core net profit made up 70% of our full-year forecast and 74% of consensus’. The performance was broadly in line as 2H should be seasonally stronger, with margin support coming mainly from the cement and property divisions, which constituted 46% of pretax profit in 1H. In spite of the continued stiff competition in the domestic cement market, its cement margins stayed flat yoy. The absence of dividends was no surprise.
Cement as support to earnings, HSR as catalyst
Cement’s contribution to YTL Corp’s bottomline has grown to almost one-third in FY13 and we expect it to rise further given the 30% increase in capacity. The domestic industry continues to be highly competitive. But YTL Cement is well positioned, thanks to its high operating margins, backed by high-end projects and the group's premium product mix. Separately, its prospects of securing the RM30bn-40bn KL-Singapore high-speed rail (HSR) project are still good, in our view, especially if the private finance initiative (PFI) or public-private partnership (PPP) model is adopted. The Land Public Transport Commission (SPAD) has put 4Q15 as the targeted tender period, suggesting clearer revelations on the execution plans for HSR over the course of 2015.
Attractive dividend yield
We believe YTL Corp’s 6% yield is sustainable and is supported by cash from its various operating units, mainly cement and utilities. FY14's total payout of RM1.3bn translates into an 80% net payout ratio. YTL Corp's dividend yield is the highest among the contractors/infra conglomerates in our coverage.
Source: CIMB Daybreak - 12 February 2015
