CIMB Fixed Income Updates 22 May 2015 - YTL Corp Berhad/YTL Power International Berhad

• YTL Corporation Berhad reported a 40% decline in net profit to RM233 million in its third financial quarter ended 31 March 2015 (3Q2015) from RM390 million in the same quarter the year before. Revenue fell to RM4.0 billion in 3Q2015 from RM4.5 billion the corresponding quarter last year. Revenue drop owed in part to 11% yoy decline in construction business activity seeing a depleting order book, but also amid a decline in utilities business earnings, with YTL Power International’s 3Q2015 revenue down 18.8% yoy due to a 30.6% yoy in revenue drop at Power Seraya (due to fewer units of electricity were sold while oil trading revenues were weaker during the quarter).
• YTL Corp’s full year 2015 earnings may see a fillip from rising demand for its cement production. The 9M2015 earnings numbers of both YTL Corp and YTLP remain in line with our equity analysts’ full-year 2015 forecasts, at 75-80% of their full 2015 expectations. Typically, the coming 4Q is the group’s strongest performing quarter. As for YTL Power International, its 3Q2015 had showed a 12.1% yoy increase in profit before tax, as the 17.9% yoy decline in revenue was offset by lower operating costs and higher associate contributions.
• We think that reports suggesting YTL Power may see an extension in its expiring Malaysian IPPs is a major boost if materializes. The government may be mulling this in view of delays in the Track 3B power capacity boost implementation. Though reports suggest an extension of at most five years only, it will buoy YTLP’s cash flow. YTL Corp has RM500 million bonds maturing 2019 and RM1.0 billion maturing 2023, and YTLP’s RM4.7 billion MTNs maturing up to 2028. Moreover, expected low fuel costs into the coming year may prove a fillip to operating costs going forward, which may sustain the higher operating margin near the 15.9% reported for 3Q2015.