YTL Power International Berhad

Accounting for 100% of net profit (NP) forecasts
YTL Power (YTLP) NP of RM1,038mn was 12% lower than FY07’s NP. Stripping
off one-off tax credit of RM133mn in FY07, YTLP FY08 NP would have registered
zero growth, in line with our and consensus forecasts accounting for 100% of
forecasts. YTLP declared a final DPS of 3.75sen (tax exempt), within forecasts.
We are keeping a Buy on YTLP for its achievable dividend yield of 10.6% (net).

Overseas ventures soften domestic weaknesses
For FY08, wholly owned subsidiary Wessex Water (2% growth muted by stronger
RM vs £) and 35%-associate PT Jawa Power (13% growth supported by higher
bonus) cushioned YTLP’s domestic core operations weaknesses (down 8%).
YTLP 4Q NP of RM280mn, though improved 1%QoQ, was 5%YoY weaker due to
lower contribution from Wessex Water and domestic IPP (20-24% lower).

FY09 NP should be flat
We expect flat FY09 NP of RM1,027mn. The potential improvements from
overseas ventures would likely be stripped off by the 30% windfall tax announced
by the government (June 2008). IPPs have commenced their first monthly
payment mid-August 2008. We forecast windfall levy of RM90mn for FY09.
Malaysia IPP now accounts for less than 20% of YTLP’s earnings.

On the prowl for new concessions
Despite the regulatory setback in Malaysia, YTLP is still actively bidding for
projects overseas, most recent – Senoko Power, Singapore (estimated price tag
of US$3bn). With YTLP’s current cash balance of RM9.4bn, it has sufficient
ammo for future acquisitions. Our RNAV based PO of RM2.07 offers 22% upside
potential. YTLP is trading at PE09E of 11.5x, a discount to its historical average of
15.2x.