Friday, May 18, 2007
Rumblings At YTL Corp
Not many analysts like to research the group because they tend to keep too many things very close to their chests. A number of foreign research houses will only give a cursory view on the group, with little conviction going forward. As I am in favour of stocks with probable catalysts in the near term, I am beginning to warm to YTL Corp.
Suffice to say that the group is well managed. It would be a bit boring to hone in on the wonderful power generation, YTL-e's Wimax, YTL Cement's good outlook, etc... that everyone knows. The RNAV of the stock is anything between RM8.50-RM9.80 depending on which report you want to read. I can see two catalysts in the very near term:
a) Leveraging on Wessex Water's technical expertise to allow YTL Corp to get a foothold in Malaysia's water industry. There is estimated to be RM10bn worth of contracts to be announced soon for the water industry and the related fields. May get a a sizable bite there.
b) The on-off bullet train project. Catalyst timing looks very good now. Green light supposedly obtained from Cabinet already, only awaiting Singapore's green light. The meeting with Singapore PM last week caused a jump in IDR fervour, I tend to think that Badawi will not let such an opportunity go by without getting Singapore PM's nod for the bullet train.
Almost all reports do not include the bullet train project, fair enough, cause they haven't gotten it yet. However, surrounding circumstance and timing look good, and the project is around RM12bn. Construction net margins are estd. at 10% over a 5 year period. This could translate to an additional RM230m-240m profit a year. That works out to be at least 20%-25% jump in 2009 projected earnings.