PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
31 May 2010
MARKET DATELINE

YTL Power Share Price

Fair Value
:
:
RM2.19
RM2.15
3Q Net Profit Up 20.5% YoY Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (YTLPOWR; Code: 6742) Bloomberg: YTLP MK

Net Basic FD FD EPS FD Net
FYE Turnover Profit EPS# EPS# Growth PER C.EPS* P/NTA gearing ROE GDY
Jun (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009a 6,093.4 646.6 15.5 11.5 -12.3 19.0 1.9 2.8 10.4 8.0
2010f 10,771.3 1,133.6 16.9 13.7 18.8 16.0 17.5 1.8 2.2 17.8 9.1
2011f 10,997.1 1,176.5 17.6 14.2 3.6 15.5 18.4 1.9 2.2 17.5 9.1
2012f 11,270.1 1,215.7 18.1 14.6 3.2 15.0 19.1 1.8 2.1 17.4 9.1
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC # Excl. EI * Consensus Based On IBES Estimates

RHBRI Vs. Consensus

♦ Broadly within expectations. YTLP’s 3QFY10 results came in at the Above
lower end of our and consensus expectations with 9M net profit of RM783m In Line
(+27% yoy) accounting for around 66-67% of our and consensus full-year
Below
estimates. While 4Q tends to be a seasonally stronger quarter for Wessex
this time round, contribution would likely be hampered by a weaker GBP. Issued Capital (m shares) 7,188.7
Market Cap (RMm) 15,743.3
♦ PowerSeraya helps sustain 3Q numbers. QoQ, revenue rose 6.9% Daily Trading Vol (m shs) 5.0
mainly due to stronger contribution from PowerSeraya (+12% qoq), partly
52wk Price Range (RM) 2.10 - 2.30
offset by weaker topline from Wessex (-10% qoq, partly due to stronger
Major Shareholders: (%)
RM). Net profit, however, grew by 20.5% qoq due to: 1) stronger pre-tax
contribution from PowerSeraya as well as Wessex (+16% qoq despite YTL Corporation 41.9
lower revenue, possibly due to better operational efficiencies); and 2) EPF 9.9
lower effective tax rate of 25.1% vs. 2Q10: 27.3%. QoQ net profit growth
could have been even better if not for the investment holding and other
FYE Jun FY10 FY11 FY12
divisions, where we note that the pre-tax loss for this segment widened
EPS chg (%) (4.3) (3.5) (3.7)
further to RM40m, from RM19m in 2Q. Potentially, this could reflect lumpy
Var to Cons (%) (3.3) (4.5) (4.8)
corporate expenses and/or start-up costs for the WiMAX business.
PE Band Chart
♦ Declares 3rd interim single tier DPS of 3.75 sen. As expected, YTL
Power declared a 3rd interim single tier DPS of 3.75 sen (3Q09: 3.75 sen
PER = 16x
TE). YTD, total net DPS was 11.25 sen (9MFY09: 11.25 sen TE), which PER = 13x
translates to a net yield of 5.1%. PER = 10x

♦ Focus expected to turn to WiMAX rollout in 2HCY10. We think the

market would be watching the group’s WiMAX development and strategy
closely as we head towards 2HCY10. Recall, YTL Communications (YTLC)
plans to invest RM2.5bn over five years to roll out its network. A potential
concern here is that YTLC could decide to opt for an aggressive price
strategy in order to win subscribers, especially given that it would be Relative Performance To FBM KLCI
coming into the market with a largely unutilised nationwide network.
Nevertheless, for now, we believe investors would take comfort that
dividend levels have been maintained thus far. FBM KLCI

♦ Risks. The risks include: 1) unfavourable forex movements, which will

adversely affect the translation of foreign earnings; 2) potential change in
competitive landscape under the National Energy Plan; and 3) execution YTL Power
risk and poor subscriber numbers for WiMAX.

♦ Forecasts. We have trimmed our FY10-13 net profit forecasts by 3.5-

4.3% to account for the losses at the investment holding and other
divisions, coupled with an upward revision in our effective tax rate
assumptions to 25% p.a. (24% p.a. previously).

♦ Investment case. Despite the downward revision to our earnings David Chong, CFA
forecasts, our SOP-derived fair value has been raised slightly to RM2.15 (603) 9280 2186
from RM2.12 after adjusting for the latest debt and cash balances. Market david.chong@rhb.com.my
Perform call, however, is unchanged.

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Table 2 : Earnings Review

QoQ YoY YoY
FYE Jun (RMm) 3Q09 2Q10 3Q10 (%) (%) 9M09 9M10 (%) Comments
Power Generation 725 2,506 2,778 11 >100 1,298 7,799 >100 Higher yoy mainly due to contribution from
PowerSeraya (3QFY09 and 9MFY09: One
month contribution).
Water & Sewerage 597 604 543 (10) (9) 1,800 1,809 1 Weaker qoq due to stronger RM (+5.4%
qoq vs. GBP) and possibly, lower volume
sales.
Investment Holding 29 25 30 21 6 159 81 (49)
Revenue 1,351 3,135 3,351 7 >100 3,257 9,690 >100

Operating profit 436 500 552 10 26 1,313 1,560 19

Interest expense (215) (214) (199) (7) (8) (638) (655) 3 Total debt lower qoq at around RM20.5bn
as at end-3QFY10 (vs. 2QFY10: RM22.9bn;
3QFY09: RM22bn) due to repayment and
strengthening of RM vs. GBP.
Associates 92 58 49 (15) (46) 168 161 (4)
Pre-tax profit 313 345 403 17 29 843 1,066 26 9MFY10 stronger yoy due to: 1)
consolidation of PowerSeraya; and 2)
impact of windfall tax provision in 1QFY09,
partly offset by higher losses from the
investment holding and other business
segment (RM82m loss vs. RM76m profit in
9MFY09).
Tax (92) (94) (101) 7 10 (226) (283) 25
Effec tax rate (%) 29.3 27.3 25.1 26.8 26.6
Minority interest 0 0 0 nm nm 0 0 nm
Net profit 221 250 302 20 36 617 783 27
Source: Company, RHBRI

Table 3 : Sum Of Parts

RMm RM/share
Domestic power DCF 1,761.6 0.20 DCF at WACC of 6.3%
PT Jawa Power DCF 3,100.7 0.36 35% share of DCF at WACC of 8%
Wessex Water 16,391.9 1.88 1.1x P/RCV plus 10% quality premium
PowerSeraya 8,676.0 1.00 Cost of investment
Other 1,209.7 0.14 Investments and other assets at book value
Total 31,139.9 3.57
Less: Net debt (12,406.5) (1.42) Inclusive of cash from warrant conversion
Net NPV 18,733.4 2.15
Source: RHBRI estimates

Table 4 : Earnings Forecasts Table 5 : Forecast Assumptions

FYE Jun (RMm) FY09a FY10F FY11F FY12F FYE Jun FY10F FY11F FY12F
Power 3,403.1 7,886.9 8,031.6 8,221.0 Power installed capacity (MW)
Water 2,510.7 2,704.4 2,785.5 2,869.1 Paka 808 808 808
Investment Holding 179.6 180.0 180.0 180.0 Pasir Gudang 404 404 404
Turnover 6,093.4 10,771.3 10,997.1 11,270.1 PT Jawa (35%-owned) 1,220 1,220 1,220
49.8 76.8 2.1 2.5 PowerSeraya 3,100 3,100 3,100
EBITDA 2,501.9 3,043.6 3,121.8 3,199.4
Margin (%) 41.1 28.3 28.4 28.4 Wessex Water
Dep & Amort (608.6) (804.6) (829.9) (855.2) Revenue growth (%) 4.0 4.0 4.0
Operating profit 1,686.2 2,239.0 2,291.9 2,344.2 EBITDA margin (%) 65.0 63.7 62.4
Other income 93.8 100.0 50.0 50.0 Source: Company data, RHBRI estimates
Interest income 51.8 51.8 51.8 51.8
Interest expense (877.5) (1,073.8) (1,098.0) (1,098.0)
Associates 225.5 194.5 219.6 219.6
Exceptionals 207.0 0.0 0.0 0.0
Pre-tax profit 1,386.9 1,511.5 1,515.3 1,567.6
Tax (740.3) (377.9) (378.8) (391.9)
Minority interest 0.0 0.0 40.0 40.0
Net profit 646.6 1,133.6 1,176.5 1,215.7
Source: Company data, RHBRI estimates

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
(previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and
information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to
opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an
offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever
and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time
have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
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may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans
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“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher
risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

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actions of third parties in this respect.

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