Affin-UOB: YTL Power ACCUMULATE
Affin-UOB Research, 21 November 2003
By Alex Goh
1Q FY04 results within expectations
Within expectations. 2H likely to see lower earnings with the expiry of the supplemental power purchase agreement (SPPA) with Tenaga.
Forecast maintained. Projecting a slight 2% drop in EPS in FY04 with the expiry of the SSPA on 31 Dec 2003.
Our target price of RM3.90 based on DCF offers a good 13% potential upside.
Attractive dividend yields of 5.8%.
Maintaining our forecast of a flat 2% group turnover growth for FY04 as the higher revenues from water and sewerage services could be partially offset by the expiry of the SSPA for the power generation division.
Given Tenaga’s high power reserve margin of 40% currently and in the absence of any announcement by YTL Power, it is uncertain whether the SSPA may be extended. We estimate that an extension of the PPA based on the original terms could increase our EPS forecast by 3.3% for FY04 and 6.5% for FY05.
Maintaining our projections for Wessex Water. Wessex’s higher operating costs in 1Q FY04 are in line with our forecasts given our pretax margin estimates of 16.6% for FY04.