YTL Power - heavy capex for YES 4G

The group is at the tail end of a heavy capex cycle for its YES 4G telecommunications division. Estimate it had ploughed in almost rm2.1 billion to build its YES network and infra.

Together with the award of the 1BestariNet project by the government, the management is well leveraged to focus on average revenuer per user – estimated at rm50 to rm60 at this juncture.

Progressively, revenue per available room enhancement should help narrow the divisional pre tax loss of rm270 million in the financial year end June 30 2013. However do not expect this division to break even in the next two years from Jan 2014 as competition among telecommunications players within the 4G arena is intensifying.

Wholly owned subsidiary Singapore unit YTL PowerSeraya Pte Ltd continues to be the main earnings anchor – accounting for 74% and 54% of FY2013 revenue and profit before tax respectively.

Re rating include the presence of stronger economic recovery in Singapore, meaningful M&As and a more active capital management.

A key upside will be earnings accretive M&A including bidding for Track 3B 2000MW Greenfield cola fired power plant.