YTL to be lifted by recovery in construction division
KOTA KINABALU: YTL Corporation Bhd’s (YTL) could see its financial performance for the financial year 2019 (FY19) and FY20 lifted by the recovery in its construction division, analysts observed.
Earlier this year, it was reported that YTL had secured a package from the Gemas-Johor Baru (JB) electrified double tracking railway project.
Due to Pakatan Harapan Government’s intention to review major construction projects, the development of the Gemas-JB double tracking project was put on hold.
However, according to the research arm at MIDF Amanah Investment Bank Bhd (MIDF Research), post-meeting with the Johor State Government, the Minister of Transport announced that the Gemas-JB double tracking project will proceed as scheduled and there is the possibility of expansion to the project scope with additional stations versus the current planned 12 stations.
It viewed this development as positive to YTL as the addition of the Gemas-JB project (which it estimate YTL’s share of the contract at RM8 billion) on top of construction of the group’s Tanjung Jati power plant in Indonesia (estimated construction value of RM4 billion) will provide a massive expansion to the group’s orderbook from the current RM400 million to some RM12 billion.
“Gemas-JB is understood to be already underway (20 per cent progress) while Tg Jati construction is expected to commence early 2019.
“Both the projects are estimated to enhance group earnings by 19 and 26 per cent over FY19 and FY20 forecast,” MIDF Research said.
It pointed out that YTL Cement is expected to be a key beneficiary of the construction division’s orderbook expansion.
“We expect a combination of the Gemas-JB rail job and the construction of Tanjung Jati plant to lift YTL Cement revenue by some 12 per cent (or RM300 million per annum) on full year basis (likely from FY19F on) as supplies for both projects will be sourced from YTL Cement,” it projected.
For Tanjung Jati, the research team noted that YTL is looking to export clinkers into Indonesia with a local grinding plant to be setup to complete the process.
It added, “YTL Cement’s solid balance sheet backing of a net cash of RM1b, positions the group well for acquisitive expansion both locally and overseas.”
Meanwhile, on the group’s 54per cent owned power division; YTL Power, MIDF Research noted that the Tanjung Jati 1320MW coal power plant is scheduled for commercial operation in 2021F with a 30-year Power Purchase Agreement (PPA) up till 2051.
“With finalisation of PPA terms, the project is on track to reach financial close soon. YTL Power is expected to be looking at several options, which may include Sukuk financing or US dollar financing. Construction of the plant is expected to commence next year,” it explained.
It further pointed out that the Tanjung Jati project is estimated to cost US$2.7 billion (RM11 billion) including land relocation cost and capitalised interest.
It also noted that the engineering, procurement, construction, and commissioning (EPCC) value of the project is estimated at RM4 billion, expected to be undertaken by YTL’s construction arm.
“Construction is expected to commence next year and is expected to be spread over three years as COD of Tanjung Jati is expected in 2021,” MIDF Research added.