Uncertainties arise on YTL’s ability to hit orderbook target with new Pakatan Harapan government

KUCHING: There are now uncertainties on YTL Corporation Bhd’s (YTL) ability to hit the group’s orderbook target in light of the new Pakatan Harapan Government.

The research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) earlier ‘buy’ thesis on YTL was premised on a revival of its construction unit, with management targeting order book to swell to some RM12 billion, from circa RM400 million at endcurrent year 2017 (CY17), driven mainly by rail-related contracts.

“However, the new Pakatan Harapan Government is expected to review all mega projects in the construction sector, particularly those awarded to China based contractors.

“This raises uncertainties on YTL’s ability to hit its orderbook target in the near-term and derails our earlier thesis.

“Cement earnings is also likely to be impacted negatively from a review of the major construction contracts,” MIDF Research said.

MIDF Research recapped that YTL’s construction order book was expected to expand significantly by end CY18F.

The research arm noted that from circa RM400 million, comprising mainly internal property development projects such as YTL’s new Pavilion headquarters, orderbook was expected expand to some RM12 billion by year end.

It further noted that key drivers for this were the RM9.4 billion Gemas-Johor Bahru double tracking project over the next four years and project delivery partner (PDP) role for the high speed rail (HSR) project.

Another key driver includes the construction of 80 per cent-owned Tanjung Jati coal power plant in Indonesia over the next three years whereby US$1 billion (RM3.8 billion) of the project’s US$2.7 billion project value comprise of construction.

“The Gemas-JB double tracking project was awarded to a consortium of Chinese companies comprising CRCC, CCCC and CECC in 2016.”