Credit Flash_YTL Power_14 May 2015

Steady despite headwinds, papers seem fairly priced
·        We place a stable credit outlook on YTLP, despite expecting some softening in utilities in the near term, due to (i) low business risk profile, (ii) robust cash hoard, and (iii) strong financial flexibility.
·        No liquidity concern in the near future as next bond repayment is in 2018, but lump sum of MYR2.2b is substantial. We take comfort in YTLP’s strong financial flexibility and ability to tap the programme (expiry in 2036) for refinancing.
·        Wessex Water remains resilient while PowerSeraya continue to face headwinds, Malaysian IPPs with uncertain fate and broadband business still loss making. Notwithstanding the challenges, we are not worried about YTLP’s credit profile and suggest a buy if pricing is attractive.
·        Papers seem fairly priced relative to the indicative AA1/AA+ curve, but YTLP’18 and ’22 last traded cheaper than the curve.