Sterling second-quarter performance by YTL Corp

PETALING JAYA: YTL Corp Bhd posted a 44.6% year-on-year jump in net profit to RM237.4mil for its second quarter ended Dec 31, 2011 compared with RM164.2mil a year earlier.

For the quarter under review, the well-diversified group's revenue increased 18.4% year-on-year to RM5.3bil.

Group managing director Tan Sri Francis Yeoh said the group continued to perform well due mainly to the “ongoing resilience of our multi-utility businesses in Malaysia, Britain and Singapore”.

“Our cement and multi-utility operations, which are the group's major contributors, continue to register sound performance,” he said in a statement.

For the six months ended Dec 31, 2011, YTL Corp recorded a 10.4% year-on-year jump in net profit to RM489.2mil while revenue increased 10.8% to RM9.87bil.

YTL Corp and its listed arms' financial year ends on June 30, 2012 (FY12).

Meanwhile, for the first half of FY12, YTL Power International Bhd's net profit grew 5.2% year-on-year to RM560mil while revenue rose 9.4% to RM7.7bil, due mainly to better performance of its merchant multi-utility businesses.

However, the division's YES mobile broadband operations registered a loss due mainly to the upfront implementation costs to build the 4G network for scale in order to cover the peninsula.

YTL Cement Bhd saw its net profit for the first half of FY12 grow by 8.8% year-on-year to RM167.9mil while revenue increased 12.2% to RM1.15bil due mainly to higher demand for cement in the construction industry and contributions from offshore subsidiaries.

YTL Cement is undergoing a de-listing process; as at Feb 21, the acceptances of the voluntary share exchange offer into YTL Corp's shares had resulted in YTL Corp, YTL Industries Bhd and persons acting in concert holding more than 90% of YTL Cement's shares.

The trading of YTL Cement's shares and irredeemable convertible unsecured loan stocks will be suspended from 9am on Feb 29.

On YTL Power, analysts said the company's results for the first half of FY12 were within expectations.

CIMB Research noted that YTL Power was keeping cash for mergers and acquisitions, for which it has a good track record.

“We believe YTL Power would eventually win the national 1Bestarinet smart school project. The project is worth RM300mil per annum over 10 years,” said CIMB Research.

Meanwhile, HwangDBS Vickers Research pointed out that YTL Power's dividend per share was lower quarter-on-quarter.

The research house said this was possibly because the company wanted to retain cash to fund increasing capital expenditure for YES, and potential investments in new power plants in Malaysia and overseas regulated assets.

YTL Power had declared a 1.875% or 0.9375 sen per share second interim dividend for FY12.



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YTL Cement seeks suspension of shares

YTL Cement Bhd has requested for suspension of trading in its shares from 9am on Feb 29, 2012 pursuant to Paragraph 16.02(3) of the Main Market Listing Requirements.

In a filing to Bursa Malaysia, YTL Cement said the suspension was related to its previous announcement on unconditional share exchange offer from YTL Industries Bhd.

It said YTL Industries has offered to acquire the entire equity interest and all outstanding irredeemable convertible unsecured loan stocks in YTL Cement.

At 11.40am, its share price stood at RM4.64, down by six sen, after opening eight sen lower at RM4.62. -- Bernama



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YTL Cement retreats, trading halt on Feb 29

YTL Cement Bhd retreated 5.4 per cent to RM4.54, on course for its biggest loss since Oct. 29, 2008. Trading of shares in the cement maker will be suspended from Feb 29 before a delisting, as its parent YTL Corp. (YTL MK) held more than 90 per cent of the company following a buyout offer, according to separate exchange filings. -- Bloomberg



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Market down, weighed by big cap plantations, Greece worries, high oil prices

KUALA LUMPUR (Feb 22): Big cap PLANTATION [] stocks weighed on the 30-stock FBM KLCI in the morning session on Wednesday, with PPB emerging as the top loser.

At 12.30pm, the FBM KLCI was down 2.46 points to 1,561.32. Turnover was 1.15 billion shares valued at RM744.330 million, reflecting the lower quality of trading with interest seen in lower liners and penny stocks. There were 283 gainers, 450 losers and 287 stocks unchanged.

The broader market was cautious as investors were still nervous about Greece’s ability to stick to the austerity plan. High crude oil prices also posed another major concern, with Brent crude for April at US$121.21 a barrel and US crude for April at US$105.80 a barrel.

Regional markets were mostly higher with Japan’s Nikkei 225 up 0.77% to 9,536.34, Shanghai’s Composite Index added 0.45% to 2,392.16, Taiwan’s Taiex 0.92% to 7,994.53, South Korea’s Kospi 0.04% to 2,025.01. However, Hong Kong’s Hang Seng Index fell 0.8% to 21,460.90 and Singapore’s Straits Times Index 0.43% lower at 3,012.06.

Crude palm oil third-month futures rose RM13 to RM3,281 while the ringgit weakened to 3.0255 to the US dollar.

PPB fell 46 sen to RM17.18, dragging the 30-stock KLCI down 0.86 of a point , IOI Corp fell five sen to RM5.39, pushing the index down 0.76 of a points while KLK fell 30 sen to RM23.70, shaving 0.5 of a point of the index.

Batu Kawan shed 32 sen to RM18.60 and Genting Plantations 15 sen to RM9.25. However, Chin Tek rose 24 sen to RM8.90 and Far East added 12 sen to RM7.40.

PPB’s 18.3% associate Wilmar International Ltd -- the world's largest listed palm oil firm -- reported fourth-quarter profit that missed analysts’ estimates.

BAT was the top loser, down 70 sen to RM52.30, Harrison 52 sen to RM3.18, Fima Corp 43 sen to RM6.32 and YTL Cement 26 sen to RM4.54. Loss-making Perwaja fell 14 sen to 77 sen.

Among the gainers were Dutch Lady, up 40 sen to RM25.80, RHB Cap 30 sen sen to RM7.85, Kris Assets 17 sen to RM6.60, F&N 16 sen to RM18, Hartalega 13 sen to RM7.89 and Genting 10 sen to RM10.84.



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KLCI stages mild rebound, boost from Greek debt accord

KUALA LUMPUR (Feb 21): Blue chips staged a mild rebound in the afternoon session on Tuesday in line with most key Asian markets as sentiment was bolstered by the Greek bailout deal.

At 3pm, the FBM KLCI was up 1.85 points to 1,562.421. Turnover was 1.06 billion shares valued at RM865.49 million. There were 292 gainers, 414 losers and 353 stocks unchanged.

Panasonic Malaysia was the top gainer, adding 68 sen to RM21.19 while Maxis gained 19 sen to RM6.

Among the PLANTATION []s, United Plantations added 62 sen to RM23.38, BLD Plantations 21 sen to RM10.04 and Sarawak Plantations 14 sen to RM3.06.

F&N added 22 sen to RM17.80 on mild buying interest after its share price was recently impacted by the decline in earnings.

Nilai Resources added 14 sen to RM1.55 after the major shareholders proposed a selective capital repayment (SCR) of RM1.50 a share.

YTL Cement and MBM Resources added 13 sen each to RM4.73 and RM4.43.



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YTL Cement minorities stuck between a rock and a hard place

KUALA LUMPUR: It would appear that YTL Cement Bhd’s minority shareholders are stuck between a rock and a hard place when it comes to accepting YTL Corp Bhd’s offer to take the former private.

Last December, the conglomerate made a conditional share exchange offer to buy the remaining shares and outstanding irredeemable convertible unsecured loan stocks (ICULS) in YTL Cement that it does not own at RM4.50 and RM2.21 respectively.

The share exchange would be settled with the issuance of YTL Corp shares of 10 sen each at RM1.42 per share. This translates into an exchange ratio of 3.17 YTL Corp shares for every YTL Cement share, and 1.56 YTL Corp shares for every YTL Cement ICULS.

The offer, which will be closed on Feb 10, 2012, raised eyebrows as YTL Corp received a waiver from Bursa Malaysia to hold an extraordinary general meeting (EGM) to obtain YTL Corp shareholders’ approval for the share swap.

YTL Corp based this waiver on the grounds that it has obtained authorisation from its shareholders at its annual general meeting (AGM) last November to issue up to 10% of its current issued shares without the need for shareholders’ approval. YTL Cement was also not required to hold an EGM.

As such, the deal would go through without an EGM at YTL Corp and YTL Cement.

HwangDBS Investment head of equities Gan Eng Peng said YTL Corp had provided a poor share swap for the minority shareholders of YTL Cement, adding that the minorities could not object to the offer as no EGM would be held, and the offer does not include a premium.

“Furthermore, YTL Corp’s high effective shareholding means it is very easy to delist YTL Cement, forcing the minorities to accept the poor deal,” Gan told The Edge Financial Daily.

YTL Corp already owned 47.4% of YTL Cement on Jan 9, 2012, the posting date of the offer document . As at Jan 20, it received acceptances for an additional 9.62% stake in YTL Cement which nudged up its interests to 57.02%, hence making the offer unconditional. Feb 10 will be the first closing date for the offer.

Gan said the share swap is essentially a case of Hobson’s Choice for YTL Cement’s minorities who have little to benefit from the share swap, whether they accept or reject the offer.

Gan noted that if the minorities accept the offer, they would be trading for less attractive YTL Corp shares which are more expensive and provide less dividend payout.

For FY11 ended June 30, YTL Corp and YTL Cement declared two sen and 13 sen in dividends to their shareholders respectively. The dividends represent a yield of 1.4% for YTL Corp shares at RM1.42 each, and 2.9% yield for YTL Cement shares based on the offer price of RM4.50 each.

Gan also noted that the minorities would be switching their investment to a conglomerate, which is less favourable than a pure-play stock.

The latest statements ended Sept 30, 2011 showed that YTL Cement was in a net cash position, while YTL Corp had RM28.34 billion in borrowings and RM12.97 billion in cash.

As at Sept 30, 2011, YTL Corp’s and YTL Cement’s net assets per share were RM1.20 and RM4.76 respectively,

For FY11, YTL Corp posted a net profit of RM1.03 billion or 11.53 sen per share (basic) and 11.44 sen (fully diluted).

YTL Cement, meanwhile, recorded RM337 million in net profit, with earnings per share of 71.53 sen (basic) and 48.44 sen (fully diluted).

At the offer price of RM4.50, YTL Cement is being valued at 0.95 times book, while the shares it will receive in YTL Corp are priced at 1.18 times book.

On a price-earnings ratio (PER) basis, YTL Cement is priced at a historical PER of 6.3 times, while the YTL Corp shares are issued at a PER of 12.3 times — almost twice that of YTL Cement shares.

On a fully diluted basis though, the PER valuation gap narrows, with YTL Cement valued at 9.3 times and YTL Corp at 12.4 times.

If the minorities were to refuse the offer, Gan said they would end up with YTL Cement shares that are less liquid as other parties would have accepted the share swap.

Note that YTL Corp already owned a 57.02% stake as at Jan 20.

In its announcement to Bursa Malaysia, YTL Corp said it does not intend to maintain the listing of YTL Cement if it does not meet the public shareholding spread of 25%.

YTL Corp and parties acting in concert (PAC) currently have a 96% stake in the ICULS. If the ICULS are fully converted, YTL Corp and PAC would own 67% of YTL Cement’s enlarged share capital.

“It would be easy for YTL Corp to increase its shareholding from 67% to 75% and force a delisting. In an EGM called for delisting, all shareholders, including PAC, can vote and there should be an exit offer of the same nature”, said Gan.

In addition, a minimum 90% acceptance level of the outstanding shares would result in a mandatory acquisition by YTL Corp of YTL Cement shares, including those that belong to the dissenting shareholders.

As such, Gan noted that the outcome is not favourable for YTL Cement’s minority shareholders, whether they accept the offer or not.

Compared with the recent privatisation offers for Proton Holdings Bhd and QSR Brands Bhd which offered a premium to the minorities, it appears that YTL Cement is left with no clear winning choice.

While the share swap is an easy deal for YTL Corp to privatise its subsidiary at a low price, observers are concerned that it would become a precedent for similar deals in the future.


This article appeared in The Edge Financial Daily, February 2, 2012.




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KLCI rises at mid-morning, lower liners in focus at Bursa

KUALA LUMPUR (Jan 26): Lower liners were in focus at Bursa Malaysia Securities Bhd at mid-morning on Thursday as the FBM KLCI edged up, lifted by select blue chips.

At 10am, the FBM KLCI added 0.92 of a point to 1,520.68.

Gainers led losers by 230 to 141, while 221 counters traded unchanged. Volume was 368.82 million shares valued at RM208.71 million.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.02% to 20,314.70, South Korea’s Kospi gained 0.20% to 1,956.12, Singapore’s Straits Times Index edged up 0.20% to 2,897.28 and Japan’s Nikkei 225 shed 0.03% to 8,881.30.

The China and Taiwan stock markets are closed for the Chinese New Year holidays.

BIMB Securities Research in a note Thursday said the lack of new developments in Europe coupled with the highly anticipated low rate regime as pledged by the Feds, acted as catalysts for Wall Street pushing the Dow Jones Industrial Average up 81 points to close at a high of 12,757.

However, the same cannot be said for major European bourses as most ended up in the red as Greece remained locked in a negotiation stalemate on its debt restructuring, it said.

Meanwhile, performance from regional markets were rather mixed yesterday possibly from the holiday mood that most were still enjoying with Hong Kong and Taiwan remaining closed for Chinese New Year celebrations, it said.

The research house said that on the domestic front, the FBM KLCI saw some profit taking on blue chips as reflected by the 3 point decline to a tad below the 1,520 mark.

“Nonetheless, retailers came out in droves as trading on penny stocks came alive on the 1st trading day in the Year of the Dragon.

“We expect the benchmark index to move within a tight range of between the 1,515 and 1,525 levels and envisage focus to be on the lower liners again,” it said.

On Bursa Malaysia this morning, Boxpak added 18 sen to RM2.35. Theta 11.5 sen to 64.5 sen, YTL Cement, DRB-Hicom and WCT gained 11 sen each to RM4.47, RM2.41 and RM2.45, Carlsberg, Jaya Tiasa, Hartalega and Nestle added 10 sen each to RM8.78, RM7.13, RM6.70 and RM56.20 respectively, while GCE added nine sen to 75 sen.

DBE Gurney was the most actively traded counter with 27.5 million shares done. The stock added half a sen to 13 sen.

Other actives included Wijaya, DRB-Hicom, Unisem, Denko, KHSB, JCY and Iris Corp.

Decliners included Malayan Flour Mills, Hibiscus, DKSH, Can-One, Bursa Malaysia, Perduren, Chin Well, Kian Joo and MSM.



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Easy to take YTL Cement private

KUALA LUMPUR: YTL Corp Bhd may be able to take YTL Cement Bhd private without a single EGM, leaving little room for minority shareholders of the latter to voice their issues.

YTL Corp is seeking a waiver from the “requirement to seek shareholder approval” from Bursa Malaysia on grounds that it has obtained authorisation from its shareholders at its AGM on Nov 29 to issue up to 10% of its current issued shares without the need for shareholder approval.

Likewise, YTL Cement may not have an EGM either as its company secretary Ho Say Keng told The Edge Financial Daily in an email reply. “This is a voluntary offer and no EGM is required of YTL Cement,” he said.

To recap, YTL Cement shareholders have been offered 3.17 YTL Corp shares for each YTL Cement share at an offer price of RM4.50, and 1.56 YTL Corp shares for each RM1 in irredeemable convertible unsecured loan stocks (Iculs) at an offer price of RM2.21.

YTL Corp only has to issue 747.19 million shares or 5.3% of its current issued shares for the 47.8% of YTL Cement’s shares that aren’t already owned or held by any parties acting in concert, according to estimates by The Edge Financial Daily.

The Minority Shareholder Watchdog Group (MSWG) told The Edge Financial Daily that while the offer looks good for YTL Corp, it has some concerns for YTL Cement’s minority shareholders and may not get a chance to raise them if neither company has an EGM.

When YTL Cement shareholders exchange their shares for YTL Corp shares, they will face a drop in dividend yield, an increase in price-to-book (P/B) and increased gearing, said MSWG.

A report by Affin Investment Bank Bhd believes the valuation appears fair and explained, “The proposed offer is not an exit offer but rather a merger of two companies and thus no premium was offered.”

Affin’s report reiterated Tan Sri Francis Yeoh’s justification: it will provide trading liquidity to minority shareholders.

However, YTL Cement shareholders will experience a drop in dividend yield, said MSWG, based on YTL Cement’s price of RM4.50 and historical dividend payouts of 13 sen and YTL Corp shares at RM1.42 and a historical dividend payout of two sen.

The offer will also create many odd-lots due to the odd conversion ratio, said MSWG, and hopes the odd-lots will be eliminated by distributing a dividend.

A separate report by RHB Research Institute Bhd released yesterday noted, “The lack of acquisition premium above the existing share price suggests that YTL Corp is not going all-out to privatise YTL Cement.”

A more ideal time to privatise YTL Cement would have been after November 2012, when the existing Iculs, which are 97% held by YTL Corp and related parties, can be converted into YTL Cement shares at a better conversion rate, said RHB.

RHB believes that the offer will go unconditional since the current stake held by YTL Corp and related parties of 52.8% already exceeds the 50% threshold rate.

A market observer said the crucial shareholding level to watch will be whether YTL Corp receives a minimum acceptance of 90%, to guarantee a full acquisition and the delisting of YTL Cement.

Any acceptance above that level would result in a mandatory acquisition of YTL Cement, including the shares of dissenting minority shareholders.

It is worth noting that the top 30 shareholders of YTL Cement already own 86.5% of the company, as at Sept 30.

RHB maintained its “market perform” recommendation for YTL Cement shares, which it gave a fair value of RM4.75.

According to Affin’s report, the acquisition will boost YTL Corp’s earnings per share for FY13 by 6% from 11.9 sen to 12.6 sen.

Accounting for a 15% holding company discount, Affin raised its target price from RM1.55 to RM1.65 and maintains an “add” call, and noted, “The acquisition will be value enhancing given the lower price-to-earnings ratio acquisition price tag.”

On a separate note, MSWG told The Edge Financial Daily that it had voiced concerns about the disparity between YTL Cement’s strong earnings growth and flat dividend payout at the company’s AGM on Nov 29.

“YTL Cement had explained that the cash will be conserved in view that the global economy will be bad next year,” said a MSWG spokesperson.

YTL Cement’s earnings have been growing at an average rate of 21% per annum for the past four years, compared to dividends which have been relatively flat and averaged 16.2 sen in the same period. This has led to a build-up to RM1.2 billion in YTL Cement’s cash pile, compared to RM866 million in debt.

YTL Cement yesterday closed 14 sen lower or by 3.04% to RM4.46 from RM4.60, while YTL Corp remained unchanged at RM1.54.


This article appeared in The Edge Financial Daily, December 21, 2011.



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YTL Cement to be taken private

KUALA LUMPUR: YTL Corp Bhd is making a voluntary share swap offer for YTL Cement Bhd at an offer price of RM4.50 per share.

The Edge had reported on Oct 17 that a corporate exercise was brewing in the YTL Group.

Under the proposed scheme, YTL Cement’s minority shareholders will be getting 3.17 YTL Corp shares for every existing YTL Cement share held.

Based on YTL Corp’s closing price of RM1.54 yesterday, the takeover offer values the group’s cement unit at RM4.88 per share, which is only a 6.12% premium over the market value.

Also, YTL Corp is offering RM2.21 for every RM1 in irredeemable convertible unsecured loan stocks (Iculs) of YTL Cement. This translates into 1.56 YTL Corp shares for each RM1 Iculs.

As at Dec 16, YTL Corp and its investment vehicle YTL Industries Bhd collectively hold 47.8% in YTL Cement.

According to some analysts, the minorities of YTL Cement seem to be getting the raw end of the deal, considering the cement manufacturer’s cash-rich balance sheet and its steady earnings growth over the past few years. But as the acquirer, YTL Corp is seen to be getting a good deal since YTL Cement is priced at a lower valuation.

“I do not think the offer is very compelling. If the consideration had been on a cash basis, it would have been much better. Furthermore, YTL Corp is virtually offering no premium,” noted an analyst from a local investment bank.

Based on YTL Cement and YTL Corp’s three-month volume weighted average moving price (VWAMP) of RM4.44 and RM1.43 respectively, the offer would have given almost no premium at 2.03%.

“You would expect a premium of at least 10%,” said the analyst who pointed out that the offer did not reflect a control premium.

A control premium is the amount an investor will pay to acquire control of a company. It is usually higher than the current market value of the company.

YTL Cement is also trading at relatively low valuations at 9.7 times price-earnings ratio (PER) and below book value at 0.97 times price-to-book (P/B) compared with its historical 10-year average PER and P/B of 10.67 times and 1.31 times respectively. The cement maker posted a net profit of RM75.8 million for its 1QFY12 ended Sept 30.

In comparison, Lafarge Malayan Cement Bhd, which made a net profit of RM71.3 million for the same period, is trading at 19.5 times PER and 1.79 times P/B.

YTL Cement’s low valuations can be attributed to the poor liquidity of the stock with the top 30 shareholders owning 86.5% of the company as at Sept 30. Some 52.8% of the company’s shares are already held by parties acting in concert.

In a statement, YTL group managing director Tan Sri Francis Yeoh said: “This transaction represents a homecoming opportunity for the shareholders of YTL Cement as it provides them with the opportunity to better maximise the value of their investments by exchanging their shares into the diversified business of YTL Corp.”

However, an analyst pointed out that, “YTL Cement’s shareholders could easily invest directly into YTL Power [Bhd], instead of having YTL Corp shares, if they had the cash and gain the exposure directly.”

YTL Power is the largest income contributor of YTL Corp, accounting for 81% of the latter’s earnings for FY11 ended June 30.

YTL Power shares are trading at 9.8 times PER and 1.43 times P/B.

In comparison, YTL Corp’s PER is much higher at 13.4 times with a P/B of 1.29 times, which makes YTL Power a much cheaper buy.

“Furthermore, investors who had gone into YTL Cement to get exposure to the construction boom will lose that direct exposure,” added the analyst.

In practice, holding companies often trade at a discount to their earnings-contributing companies because investors prefer direct exposure to their subsidiaries.

It is worth noting that YTL Cement has RM1.374 billion in cash with some RM866.2 million bank borrowings as at Sept 30.

The exercise will allow YTL Corp to gain access to YTL Cement’s net cash of RM508 million.

The extra cash in YTL Corp’s war chest will be good for the group which could take advantage of the suppressed asset valuations amidst current economic uncertainties.

Furthermore, an analyst noted that YTL Cement has not been very generous with dividend payment despite its ballooning cash pile.

According to Bloomberg, YTL Cement’s 12-month dividend yield is 2.86%, versus Lafarge’s 6.52%.

The outlook for the building materials sector is positive. Hence, it does make sense for YTL Corp to privatise YTL Cement as its shares are seen as undervalued.


This article appeared in The Edge Financial Daily, December 20, 2011.



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YTL Cement falls below YTL Corp offer price in privatisation move

KUALA LUMPUR (Dec 20): Shares of YTL CEMENT BHD [] fell on Tuesday to below the offer price of RM4.50 made by YTL CORPORATION BHD [] in its privatisation exercise while sentiment was also dented by the overall cautious market.

At 3.37pm, YTL Cement was down 14 sen to RM4.46 while YTL Corp lost 8.0 sen to RM1.46 at 3.37pm.

The FBM KLCI fell 12.27 points to 1,465.51. Turnover was 1.20 billion shares valued at RM818.41 million. Declining stocks led advancers 440 to 285 while 267 counters were unchanged.

On Monday, YTL Corp extended a voluntary share exchange offer to YTL Cement shareholders on the basis of RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.

RHB Research Institute said as at Nov 30, YTL Corp and its related parties owned a combined 52.8% in YTL Cement.

The research house said based on current stake held by YTLCorp and its related parties, the share exchange offer would likely go unconditional as the hurdle rate is just to achieve a more than 50% stake in YTL Cement.

“We believe some minority shareholders might take this opportunity to exit due to the low liquidity issues of YTL Cement shares. At the reference price of RM4.50, YTL Cement is valued at about 6.0 times EV/EBITDA on a fully-diluted basis, lower than Lafarge current valuation of about 8.5 times EV/EBITDA.

“We do note that minority shareholders will receive the more liquid YTL Corp shares, which then provides the more attractive exit route,” it said.

RHB Research said its indicative fair value remained at RM4.75 based on 10 times fully-diluted CY2012 EPS of 47.5sen, at 4.0 times multiple discount to its one-year forward target PER for the cement sub-sector to reflect YTL Cement’s relatively low share liquidity.

“Due to the recent run-up in share price and limited upside to our fair value, we hence downgrade our recommendation on YTL Cement to Market Perform. In the near term, we believe share price of YTL Cement is more likely to track YTL Corp’s share price due to this proposed share exchange offer. At current YTL Corp’s share price of RM1.54, YTL Cement is effectively valued at RM4.88 based on the terms of the proposed share exchange offer,” it said.



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KLCI stays in negative territory at mid-morning

KUALA LUMPUR (Dec 20): The FBM KLCI drifted lower at mid-morning on Tuesday, while key regional markets rebounded from their losses on Monday and edged up marginally higher.

At 10am, the FBM KLCI fell 3.25 points to 1,474.53.

Losers overtook gainers by 196 to 193, while 206 counters traded unchanged. Volume was 343.70 million shares valued at RM153.13 million.

Asian stocks and the euro steadied on Tuesday, but sentiment remained fragile on concerns that efforts to contain the euro zone debt crisis were faltering and tougher rules to strengthen banks' capital would further undermine their profits, according to Reuters.

Sentiment in Asia was already risk-averse, after the death of North Korea leader Kim Jong-il raised fears of regional instability and prompted investors to pull money out of riskier assets and into the safe-haven dollar on Monday, it said.

At the regional markets, Japan’s Nikkei 225 rose 0.61% to 8,346.49, Hong Kong’s Hang Seng Index added 0.83% to 18,219.62, Taiwan’s Taiex added 0.61% to 6,673.58, South Korea’s Kospi gained 0.98% to 1,794.28 and Singapore’s Straits Times Index edged up 0.21% to 2,623.67.

Maybank Investment Bank Bhd head of retail research Lee Cheng Hooi in a note to clients on Tuesday said the FBM KLCI’s resistance areas of 1,478 and 1,500 would cap market gains, whilst the weaker support areas maybe located at 1,460 and 1,476.

“Despite the US markets’ poorer tone last night, we may have a day of further windo- dressing on the local index today.

“Do liquidate on rallies (including the current window-dressing phase), as the holiday and year-end season approaches,” he said.

On Bursa Malaysia, PPB lost 32 sen to RM16.88, BAT and HLFG fell 20 sen each to RM49.20 and RM11.50, Top Glove and YTL Cement fell 11 sen each to RM4.37 and RM4.49, while Sarawak Oil Palms, Petronas Gas and KLK lost 10 sen each to RM5.40, RM14 and RM21.90 respectively.

Utopia was the most actively traded counter with 29.2 million shares done. The stock added half a sen to 11 sen.

Other actives included JCY, Zelan, Astral Supreme, and Gamuda and UEM Land warrants.

The gainers included Dutch Lady, Panasonic, KrisAssets, Petronas Dagangan, Toyo Ink, UEM Land, Faber and KAF.



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RHB Research downgrades YTL Cement to market perform

KUALA LUMPUR (Dec 20): RHB Research Institute has downgraded its recommendation on YTL Cement to Market Perform due to the recent run-up in share price and limited upside to its fair value.

“In the near term, we believe YTL Cement shares are likely to track YTL Corp’s share price due to the proposed share exchange,” it said on Monday.

YTL Corp has proposed to acquire the remaining shares of YTL Cement that it does not own via a share exchange on the basis of 3.17 YTL Corp shares for every YTL Cement share.

“We believe some minority shareholders might take this opportunity to exit due to the low liquidity issues of YTL Cement shares. At the reference price of RM4.50, YTL Cement is valued at about 6x EV/EBITDA on a fully-diluted basis, lower than Lafarge current valuation of about 8.5x EV/EBITDA,” it said.

RHB Research said minority shareholders would receive the more liquid YTL Corp shares, which then provides the more attractive exit route.



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YTL Corp extends share exchange offer to YTL Cement shareholders

KUALA LUMPUR (Dec 19): YTL CORPORATION BHD [] has extended a voluntary share exchange offer to the holders of YTL CEMENT BHD [] shares and its loan stocks to maximise the value of their investments.

It said on Monday the offer was RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.

For the irredeemable convertible unsecured loan stocks (ICULS) holders, the offer was RM2.21 for every RM1 in ICULS held, or 1.56 YTL Corp shares for each ICULS.

YTL group managing director Tan Sri Francis Yeoh Sock Ping described the transaction as a “homecoming opportunity” for YTL Cement shareholders as they could better maximise the value of their investments by exchanging their shares into the diversified business of YTL Corp.

Yeoh said the bulk of YTL Corp’s earnings was underpinned by its regulated water and utilities concessions, as well as its cement, CONSTRUCTION [], property and hospitality businesses.

“YTL Corp, as a major shareholder of YTL Cement, recognises that the liquidity of YTL Cement’s shares has continued to remain at relatively low levels, which presents a challenge to YTL Cement’s shareholders looking to adjust their investment strategies or portfolios,” he said.

He added the exchange plan would also enable YTL Corp’s shareholders to increase the stake in a highly efficient and profitable business and consolidate a greater proportion of its earnings and performance for the benefit of the wider group.


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YTL Corp extends share exchange offer to YTL Cement shareholders

KUALA LUMPUR (Dec 19): YTL CORPORATION BHD [] has extended a voluntary share exchange offer to the holders of YTL CEMENT BHD [] shares and its loan stocks to maximise the value of their investments.

It said on Monday the offer was RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.

For the irredeemable convertible unsecured loan stocks (ICULS) holders, the offer was RM2.21 for every RM1 in ICULS held, or 1.56 YTL Corp shares for each ICULS.

YTL group managing director Tan Sri Francis Yeoh Sock Ping described the transaction as a “homecoming opportunity” for YTL Cement shareholders as they could better maximise the value of their investments by exchanging their shares into the diversified business of YTL Corp.

Yeoh said the bulk of YTL Corp’s earnings was underpinned by its regulated water and utilities concessions, as well as its cement, CONSTRUCTION [], property and hospitality businesses.

“YTL Corp, as a major shareholder of YTL Cement, recognises that the liquidity of YTL Cement’s shares has continued to remain at relatively low levels, which presents a challenge to YTL Cement’s shareholders looking to adjust their investment strategies or portfolios,” he said.

He added the exchange plan would also enable YTL Corp’s shareholders to increase the stake in a highly efficient and profitable business and consolidate a greater proportion of its earnings and performance for the benefit of the wider group.



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YTL Ind offers to buy YTL Cement

YTL Industries Bhd, a wholly-owned subsidiary of YTL Corp Bhd, has made a conditional share exchange offer to acquire the entire equity interest and all outstanding irredeemable convertible unsecured loan stocks in YTL Cement Bhd.

The offer would be through the issuance of ordinary shares of 10 sen each in YTL Corp at an issue price of RM1.42 each.

In a filing to Bursa Malaysia today, YTL Corp said the relatively low trading activity on YTL Cement shares did not present shareholders with the necessary platform to maximise the value of their investments in YTL Cement via a continued listing on Bursa Securities.

The proposed offer is a viable way to provide YTL Cement shareholders more liquidity for their investment in YTL Cement shares by exchanging for YTL Corp shares.

The YTL Corp stock was suspended today with its price at RM1.45.--Bernama



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YTL 1Q profit down on mobile broadband losses

PETALING JAYA: A RM94.9 million loss from YES mobile broadband business caused YTL Corp Bhd’s earnings for 1Q ended Sept 30, 2011 to decline 9.7% year-on-year (y-o-y). Profit attributed to shareholders came in at RM251.83 million from RM278.9 million after taking in smaller numbers from YTL Power International Bhd.

“This is not unexpected, given the nature of the business and the front-loaded capital outlay required to build our nationwide network,” group managing director Tan Sri Francis Yeoh said in a statement, adding that the business would turn in profit once scale is attained.

Revenue rose marginally to RM4.54 billion from RM4.41 billion, even though performance at cement processing and other utility divisions held up well.

The group said it is in the final stage of ongoing rationalisation of its retail and hospitality division with the acquisitions by Starhill Real Estate Investment Trust (Starhill REIT) of its eight hotels, including the Ritz-Carlton Kuala Lumpur, the Vistana chain of hotels, as well as the Pangkor Laut, Tanjong Jara and Cameron Highlands luxury resorts.

“Internationally, the trust is in the process of completing its acquisition of Hilton Niseko in Japan. In addition, the group completed the restructuring of its property development business on Nov 4,” he said.

Yeoh says the loss from YES is not unexpected due to the heavy capital outlay needed to build a nationwide network.

YTL Power’s net profit fell to RM246.2 million for the quarter compared with RM272.9 million last year. Revenue, however, grew by 4.4% to RM3.64 billion from RM3.48 billion, mainly due to better performance of its merchant multi-utility businesses.

“The group’s established utilities business, comprising power generation and power transmission in Malaysia, Singapore, Indonesia and Australia, water and sewerage services in the United Kingdom and merchant multi-utility businesses in Singapore, continued to perform steadily during the quarter,” the group said in a statement.

Another subsidiary, YTL Cement Bhd, recorded a 4.4% increase in earnings to RM75.8 million for 1QFY12 ending June 30, although revenue rose 17.6% to RM544.7 million (y-o-y).

Property development arm YTL Land & Development Bhd saw a fall in net profit to RM2.9 million for 1QFY12 versus RM3.2 million last year. Revenue declined to RM3.4 million from RM14 million, owing to “timing differences of project launches” and higher operating expenses, it said.

YTL E-Solutions Bhd recorded a RM9 million net profit for 1QFY12, compared with RM2.2 million last year, with revenue doubling to RM20.8 million from RM9.2 million. It attributed growth to the fee income derived from a spectrum sharing agreement in relation to its 2.3 GHz Worldwide Interoperability for Microwave Access spectrum.


This article appeared in The Edge Financial Daily, November 18, 2011.



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YTL Q1 net dips on broadband losses

KUALA LUMPUR YTL Corp Bhd saw its first quarter net profit decline by 9.7 per cent to RM251.8 million, mainly due to losses incurred in its mobile broadband business.

The company - which has investments in the power, cement, property development and others - registered a 3.1 per cent increase in revenue at RM4.54 billion for the first quarter ended September 30.

"The 2012 financial year has shown a promising start, with revenue increasing marginally over the same period last year, owing predominantly to the group's multi-utility businesses," Yeoh said in a statement yesterday.

Group net profit for the first quarter was slightly down on the back of a loss incurred in the "Yes" mobile broadband division operated by a subsidiary of YTL Power, which started commercial operations about a year ago.

This was not unexpected given the nature of the business and the front-end loaded ca-pital outlay required to build their nationwide network, he added.

YTL Corp expects its 4G operations to continue to pick up steam and begin recording a profit once the necessary scale has been reached.

Its unit YTL Power Bhd, which is also where its mobile broadband business is parked in, registered a 4.4 per cent increase in revenue to RM3.63 billion.

Net profit, however, was 9.8 per cent compared to the first quarter of last year.

YTL Cement Bhd saw revenue improve 17.6 per cent to RM544.7 million during the quarter. Net profit increased 4.4 per cent to RM75.8 million, despite higher production costs and increase in electricity tariffs that impacted the division's profit.

Its property development arm YTL Land & Development Bhd saw a slight decline in its net profit at RM2.9 million, versus RM3.2 million a year ago.

The decline was due to timing differences of project launches by its units and increase in operating expenses.

YTL Corp said it had early this week completed part of the final stage of the ongoing rationalisation of its retail and hospitality REITs with the acquisition of eight hotels by Starhill REIT. They included The Ritz-Carlton KL, the Vistana chain of hotels, and the Pangkor Laut, Tanjong Jara and Cameron Highlands luxury resorts.

This will enable Starhill REIT to focus fully on a single class of hotel and hospitality-related assets.

"Internationally, the trust is in the process of completing its acquisition of the Hilton Niseko in Japan. In addition, the group completed the restructuring of its property development business on November 4," he said. YTL Corp shares declined 1 sen to RM1.43 yesterday.



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