KUALA LUMPUR (MAR 19): RHB Research Institute Sdn Bhd has maintained its Neutral rating on YTL Power International Bhd and lowered its target price for the stock to RM1.50 from RM1.52 on the back of potential headwinds that YTL’s Singapore operations may face and the continued losses at WiMAX division.
In a note Tuesday, the research house however increased its estimates for YTL Power for the financial years 2014 and 2015 by 0.3% and 4.0% to RM1.12 billion and RM1.21 billon respectively.
After a recent meeting with YTL Power’s management, RHB Research said that the management of YTL Power conceded that its Power Seraya operation would likely see more pricing competition in the medium term.
RHB Research said as Singapore’s local authorities are targeting an additional 3,000 MW in generation capacity by 2017, tariff pricing may “remain stagnant and even face some downside risks in the near term.”
YTL Power’s unit, WiMAX registered pre-tax losses of RM137.7 million in first half of financial year 2013.
However, the research house expects that the division to break even at the earnings before interest, taxes, depreciation and amortisation level by end of 2015.
Meanwhile, YTL is looking to participate in the upcoming tender for project 3B called for by the Energy Commission.
The project that comprises a greenfield coal-fired power plant with 2 times 1,000 MW capacity will present an opportunity for the group to potentially replenish its independent power producer earnings base, said RHB Research.
“We believe YTL Power might have to put in a competitive bid to bag the project,” said the research house.
The request for quotation evaluation results is expected to be announced by early April.