STOCK FOCUS OF THE DAY
YTLP Power : Paka PPA secured HOLD
We maintain our HOLD recommendation. Our fair value of RM1.67/share (from RM1.66/share) is derived from a SOP valuation. This includes YTLP’s remaining entities being valued on a DCF basis as well. It implies a forward P/E of 17x, well above its historical average of 12.5x. However, the stock offers an attractive dividend yield of 7.0%. Tenaga announced it has signed a new PPA and land lease agreement (LLA) with YTL Power (YTLP). The PPA is for an extension of 3 years and 10 months on the generation and sale of electricity from YTL Power’s 585MW combined-cycle gas-fired power plant in Paka, Terengganu. The scheduled commercial commencement date of the plant is 1 Sep 2017. The new LLA will replace the original LLA dated 1993. It enables YTLP to lease the land on which the Paka power plant occupies. The LLA extends for the length of the PPA extension and subsequent demobilisation of the plant.
The impact to YTL Power is positive but minimal. Meanwhile, it is an earnings neutral event to TNB. Earnings are back loaded till FY21F as we trim our FY18 net profit by -1.5% as we initially assumed for the Paka power plant to commence operations by FY18. It factors in an additional year reflecting the longer term PPA of 3 years and 10 months (vs. 2 years and 10 months previously). We deem lacklustre earnings visibility over its various operating entities to weigh on YLTP’s growth prospects in the interim.
Hartalega Holdings : A good wrap to FY17 HOLD
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