Monday, September 28, 2009

RHB 28/9/2009

Corporate Highlights



YTL Power : Venturing into telecoms but dividends intact Market Perform

Visit Note

- We recently met management, who was upfront and confirmed that YTLP, via YTL Communications (YTL Com), will be the vehicle for the rollout of WiMAX.

- Management stated that the two main reasons why YTLP was selected were: 1) YTLP has the necessary project management skillset required for the implementation of large infrastructure projects; and 2) YTLP has the cash and balance sheet strength to provide solid backing for the project.

- YTL Com plans to roll out a nationwide mobile WiMAX network (about 60% population coverage) for its soft launch in 3Q2010. The cost of the rollout in the first year is estimated to be around RM500-700m and in total, YTL Com plans to invest around RM2.5bn over the next five years.

- Despite the investment required for WiMAX rollout, management reassured us that YTLP’s dividends would unlikely be affected.

- We have trimmed our FY11 and FY12 net profit forecasts by 3% p.a. after incorporating YTL Com’s estimated operating losses.

- In our view, management’s reassurance regarding dividends means that a key investment thesis for the stock is intact, i.e. attractive net dividend yields of 6.9% p.a.. We raised our SOP-derived fair value to RM2.10 (from RM2.00) following an update in valuation parameters and a roll-forward in valuations but our Market Perform is unchanged.



IJM Plantation : More positive CPO price view Underperform

Visit Note

- Five key takeaways: 1) view on CPO prices; 2) FFB production growth expectations; 3) cost of production projections; 4) improved progress for its Indonesian land planting; and 5) funding requirements and plans.

- IJMP believes that CPO prices should start moving upwards towards the end of CY09 to higher levels of around RM2,600/tonne, which is expected to hold at least for the first six months of 2010. As for CY09, IJMP expects average prices to be around RM2,200, close to our projections. IJMP is still targeting 3-5% yoy growth in FFB production for FY03/10, as it believes the peak production period to have only started in Sep-09 and expects production to remain on the high side until Jan 2010. As such, it expects 3QFY10 and 4QFY10 to record better crop production on a yoy basis. We prefer to remain conservative at this juncture, and maintain our FY10 FFB production projection at a 3.7% yoy decline, before recovering in FY11-12.

- We have tweaked our forecasts up slightly for FY11-12, by 0.7-2.4%, after taking into account the lower debt assumptions. Post-earnings revision, our fair value is relatively unchanged at RM2.30, based on unchanged target PE of 13.5x CY10 earnings on fully diluted (for rights and full exercise of warrants) share base. We maintain our Underperform call on IJMP, as we believe its valuations are stretched, trading at a 10-15% premium to other mid-sized plantation stocks.

No comments:

Post a Comment