Analysts' Recommendation

Affin-UOB: YTL Corp BUY

Affin-UOB Research, 21 November 2003

1Q FY04 results within expectations



Stripping out RM112m investment gains from the disposal of YTL Power shares, 1Q FY04 accounted for 24% of our full year FY04 forecast.

Reduction in FY04 EPS due to lower one-off investment gains vis--vis our earlier projected RM204.9m.

Slight increase in FY05 EPS due to 6% upgrade in YTL Cement’s earnings on higher cement prices and demand.

Our target price of RM5.00, based on a 20% discount to RNAV of RM6.25, offers an attractive 16% potential upside.

Currently trading at a low 11.6x FY05 P/E.

Looking forward…

YTL Power - the major contributor to the group, accounting for 81% of 1Q FY04 group pretax profit (excluding one-off investment gains). The power segment alone contributed 42% of pretax profit while water & sewerage services chalked up 28%. We project YTL Power’s earnings to dip 2% in FY04 as the supplemental power agreement to provide 1,400 GWh annually to Tenaga expires on 31 December 2003.

Potential earnings for construction division should the group become the project manager for Wessex Water’s annual capital expenditure of RM1bn (GBP150m).

YTL Cement’s revenue continues to grow despite operating at near full capacity. We believe most of the growth is derived from trading activities which benefit from the group’s good wholesaling and distribution network.