YTL Power to be privatized? (Oct 2011)

According to The Edge over the weekend, "rumours are swirling that YTL Group has hired local investment bankers to work on a possible corporate exercise that could result in its restructuring".  YTL Power and YTL Land, whereby YTL Corp has a 51.7% and 57.9% stake in respectively, are said to be targets for privatization or share swap exercises to align the group.

Well, if this is true, it definitely will boost the said target companies share prices. Before jumping to the conclusion, let us get the view from professionals. With that, we have a timely article from RHB Research who touched on this matter as below:

"We believe the likelihood of a privatization is low, as its FY12 PE of 12.8x is not much lower than its 5-year average forward PE of 14.7x. Besides, YTL Power's FY12 PE is similar to the 13x PE used for our end-2012 FBM KLCI 1,385 target."

"Also, we believe it will be very costly to privatize YTL Power. While YTL Power could take on more debt to facilitate such a privatization, it would significantly hamper its ability to acquire distressed utility assets in Europe."

"Our calculations indicate that at RM2.21 (assuming a 20% premium to its last traded price of RM1.84), YTL Corp would need RM8.3bn to buy out the remaining 48.3% equity stake held by minorities and assuming full conversion of outstanding warrants. A share swap is more likely as there is not much cash at the holding company, YTL Corp."

Any synergies from consolidating?

"We do not see much synergies in realigning the companies via a share swap exercise if YTL Corp were to consolidate YTL Power and YTL Land into a single entity, since there is little overlap among these businesses."

Investment case...

"We maintain our Market Perform call on YTL Power with an unchanged SOP-derived fair value of RM2.00. YTL Power offers a decent net dividend yield of 5.1% - the key investment thesis for the stock. While news flow will lift short-term sentiment, concerns over expanding WiMAX losses may cap longer-term upside potential".

Source: RHB research report dated 17th Oct 2011

Potential Construction Projects Flow in 2011

During 4Q 2010, there were a series of positive news brought into construction sector. These news could possibly bring some cheers for local contractors during the "award ceremony" soon. To summarize it, let us examined and explored the news highlighted in 4Q 2010 for construction sector:-

OSK Research:

• KL Mass Rapid Transit, with the cabinet approving 1 of the 3 lines proposed, which will run from Sg Buloh to Kajang. It is said that the Government will set up an SPV to fund the RM36bn job via bonds and other capital market instruments. Tenders for the Sg Buloh-Kajang line will be open in April while construction will commence in July. Gamuda-MMC JV, which was recently appointed as Project Delivery Partner, to be the ultimate beneficiary of the MRT. The JV is only allowed to tender for the tunneling works estimated at RM14bn.
• Construction of the RM5bn Warisan Merdeka development is said to be slated to commence this year for implementation in 3 phases over 10 years. Amongst the local contractors, we think IJM is in the best position to participate in the tower portion given its track record with high-rise buildings in KL city center. Green building specialist Putrajaya Perdana could also benefit from the non-tower portions.
• A feasibility study is currently being conducted to evaluate the KL-Singapore High Speed Rail and will be concluded by mid-year, which cost RM10-12bn. Magnetic levitation technology was being proposed. OSK gather that YTL Corp has made proposals for several portions of the project.
• Brazail based Vale SA, the world's largest iron ore producer will invest RM467mil in Malaysia this year. The investment will involve the construction of a maritime terminal and distribution center to transport iron ore from Teluk Rubiah, Perak. We understand that Muhibbah Engineering is the only local contractor that has been pre-qualified for some of the packages.
• Bintulu Port has been invited by Sarawak government to submit a detailed proposal for the Samalaju Port. If implemented, we think Hock Seng Lee could win some packages given its marine engineering expertise.
• Malaysia and India have signed an MOU on technical assistance for road development which could enable Malaysian contractors to participate in the latter's projects. We see IJM as the clear winner from this MOU given its track record of building more than 1,400km of roads in India.
• During the Big 5 International Building and Construction Show in Abu Dhabi, it was reported that some more than USD23bn worth of construction contracts are ready to be awarded in the UAE. We view WCT as the ultimate beneficiary from contracts flow from the UAE given its past record in Abu Dhabi, Dubai and Qatar.

Why you should DUMP YTL-e, and, BUY YTL-Power now?

After successfully riding on the mini Bull market of KLCI, YTL-e is the star performer of YTL group of companies. From around RM0.80, charging upwards to RM1.70 now, YTL-e was the Top Gainer of October. However, Finance Malaysia (FM) is wondering what the reason was behind.

• First, people are crazy of YTL-e because of its impending WiMax broadband services to be rolling out this coming 18^th November
  
• And, the above is the only reason. Nothing else.
  

Why should you DUMP YTL-e now?

• The business of WiMax 4G is under YTL Communications, which is a wholly own subsidiary of YTL Power.
  
• Meaning, the success of the project would benefit YTL Power, not YTL-e.

Why should you BUY YTL-Power now?

• As mentioned, YTL Power is the ultimate owner of the WiMax broadband business.
  
• Management of YTL hints that their service would be the most competitive and attractive in Malaysia.
  
• YTL Power pays very good dividends annually.
  
• YTL Power is a laggard among blue-chip counters.
  

Then, what was there for YTL-e?

The WiMax license is awarded to YTL-e. Therefore, YTL Power will pay license fees to YTL-e annually, and that's it.


Why the service called YES?
Is it meaning YTL-E Solution (Y.E.S)?

The Preview of YTL Comms vs Astro

A lot of fighting happening on the business scene nowadays, with Proton-Fernandes and AirAsia-Tiger this year. In 2011, there will be a heat battle between YTL Comms and Astro, taking on the local broadcasting field by storm.

Proton vs Fernandes 
AirAsia vs Tiger Airways

Business Times reported that YTL Communications Sdn Bhd planning to launch a hybrid TV by end of 2011, with many industry observers wondered how it is going to break the exclusive screening rights that satellite TV giant Astro holds with various TV content providers.

"If you think you can do a monopolistic thing and control everything, I'm sorry, that era is gone. The game is over" said Tan Sri Dr Francis Yeoh, managing director of YTL Corp Bhd and executive chairman of its telecommunications arm, YTL Comms.

YTL Comms is going to collaborate with US-based Sezmi Corporation to deploy hybrid TV services in Malaysia and Asia Pacific, which will combine digital TV broadcast technology with YTL's fourth-generation (4G) wireless broadband services that would be rolled out soon.

What is hybrid TV?

With hybrid TV, consumers can view live or recorded local and cable TV stations, on-demand movies and TV shows and web videos on their mobile devices, their personal computers or their TV sets at home. It was like combining the services offered by Maxis, Astro, and Streamyx into 1 single platform.

Watch out for 18th November 2010 !!!

This is the date when YTL will launch its 4G mobile Internet with voice, which will cover 65% of the country's populated areas, right from day one. Let's wait and see. YTL said it will be monumental !!!

The battle with Astro...

As for my understanding, YTL Comms' new TV service will be based on pay-as-you-use basis.

• NO minimum fee
• NO strings attached
• World's 1st wireless quad play service, bringing broadband, voice, TV and video-on-demand together

Wow... Sounds interesting enough for all Malaysians, especially current Astro's subscibers. Let's seat back and watch the most interesting Battle of 2011 - YTL Comms vs Astro.