Dividend thesis intact

9MFY16 net profit was overall in line. However, PowerSeraya’s earnings continue to come under pressure, while the Malaysia PPA extension is still not formalised. HOLD rating maintained with an unchanged MYR1.60 TP. For now, it still appears that YTLP would repeat a 10sen DPS in FY16.

Segmentals still mixed

YTLP’s 3QFY16 net profit (excluding forex) of MYR175m (-19% YoY, -31% QoQ) brings 9MFY16 core net profit to MYR647m (-7% YoY), representing 72% of ours/consensus full-year forecasts. Segmental performances were generally healthy (Wessex in line, Wimax losses narrowed) with the exception of PowerSeraya, whose profits collapsed.

PowerSeraya’s earnings collapsed

PowerSeraya’s 3QFY16 pre-tax profit of just MYR6m (-93% YoY, -87% QoQ) represents a new low for the entity’s profitability. This is despite previous guidance of margins having stabilised. Management attributed 3Q’s weak showing to lower vesting quantities and retail margin. Meanwhile, Wimax losses narrowed substantially in the quarter, although it remains to be seen whether this is the new run-rate. On a separate note, management disclosed the Malaysia PPA extension is still not formalised. We understand there are still land lease issues to be resolved.

Earnings forecasts unchanged

YTLP is perceived more as a dividend play these days, and thus expectations of a 10sen DPS in FY16 (implying 6.9% yield) should provide downside support to the share price. Our earnings forecasts and TP are unchanged. Our TP is based on a 10% discount to our RNAV estimate of MYR1.85/share (fully diluted), which is in turn derived from a sum-ofparts with each operating entity valued using DCF.

Source: Maybank Research - 27 May 2016