YTL Power’s Bel Air Hotel acquisition still ‘out of character’
KUCHING: While YTL Power International Bhd’s (YTL Power) Bel Air Hotel Holdings S.A.R.L. acquisition appears fair to analysts, it still remain beyond the scope of YTL Power’s core business.
In a filing on Bursa Malaysia, YTL Power announced that indirect wholly-owned subsidiary YTL Jawa Energy B.V. (YTLJE) had on March 16, 2018, entered into an agreement with Bel Air Hotel, for the acquisition of 1.768 million ordinary shares, representing the entire issued and outstanding shares in the share capital of Bel Air Den Haag Beheer B.V. (Bel Air), for the consideration of 60.3 million euros in cash.
According to AmInvestment Bank Bhd (AmInvestment Bank), recent notable hotel transactions in the nearby city of Amsterdam were for Jaz in the City by Steigenberger (166 rooms) and Park Hotel (189 rooms) by AXA Real Estate and Pandox AB respectively.
“The price per room for these transactions ranged between 128,000 euros and 238,000 euros. Therefore, YTL Power’s transactional price of 197,000 euros appears fairly reasonable.
“While the acquisition appears fair, it remains beyond YTL Power’s core business of operating power, utility and telecommunication assets. However, the financial impact appears minimal at this juncture,” the research firm said.
On another note, AmInvestment Bank pointed out that YTL Power’s financial position remains sound.
The research firm noted that as of December 2017, YTL Power’s cash position of RM8.9 billion should comfortably fund the acquisition.
“YTL Power’s net gearing would inch up to 1.48-fold from 1.45-fold.”
All in, AmInvestment Bank held on to its earnings forecast as the immediate financial impact is insignificant. The research firm projected core net profits of RM690.2 million for its financial year 2018 forecast (FY18F) and RM710.6 million for FY19F.
The research firm also maintained its ‘hold’ recommendation on YTL Power and sum of parts (SOP) derived fair value of of RM1.38 per share.
“While we like YTL Power for its reliable operational execution, the absence of compelling growth drivers in the interim caps its upside potential,” the research firm said.