Barefoot Investor: YTL Power up on strategic tie-up with Marubeni

YTL POWER INTERNATIONAL BHD shares advanced on Friday, July 8 after it formed a strategic tie-up with Marubeni Corp following the latter taking up a 42.86% stake in YTL Power’s Indonesian outfit YTL Jawa BV.

At 9.20am, YTL Power added three sen to RM2.19 with 580,100 shares traded.
YTL Power on July 7 said that it expects to realise a gain on disposal of RM210.10 million from the sale of a 42.86% equity interest in YTL Jawa BV to Marubeni Corporation for US$224 million (RM680.96 million).

Its unit YTL Jawa Power Holdings Ltd had entered into the share purchase agreement with Maubeni and its subsidiary Aster Power for the sale of 7,715 ordinary shares of €1 each and certain company interests.

On the rationale for the share sale, YTL Power said it would enable Aster Power and Marubeni to co-invest in YTL Jawa BV and form a strategic partnership with the group, which was in line with YTL Power’s growth strategy of investing in long-term geographically diverse infrastructure assets, whilst concurrently achieving synergies across its portfolio of utility businesses.

It said the strategic partnership would facilitate collaborations between YTL Power and Marubeni on potential investments and the development of future opportunities in the global utilities industry.

“The YTL Power group is continuously seeking to develop and expand its presence in utility businesses both in Malaysia and offshore,” it said.
CIMB Equities Research has a Buy call on YTL Power with a sum-of-parts target price of RM2.80.
The deal could be positive as the partnership will improve YTL Power’s chances of clinching other Indonesian power projects.

“However, we cut our FY11-13 core EPS by 2-11% for lower contributions from YTL Jawa and higher WiMax losses. Our SOP-based target is now 2% lower at RM2.80 as cash received from Marubeni does not offset the drop in contributions from YTL Jawa and higher borrowings.

“We also cut FY11-13 net DPS by 31% to reflect a more conservative payout policy,” it said.

CIMB Research said despite the downgrade in its numbers, YTL Power remains a BUY as it believe its share price already reflects the WiMax uncertainties and lower dividends.

It said there could be a re-rating on the back of M&A and positive WiMax developments.(


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