Recently I looked into the numbers of YTLPOWER's latest quarterly results and although revenue increased substantially due to Power Seraya's 1 month contribution for the quarter, the net profit did not change much.
Delving deeper into the report under segmented reports, which will separately show the revenue and profits of it's water, electricity and invesment holding susbsidiaries. Also listed will be their shares of associated companies probably from their Australian and Indonesian operations.
Water operations = Wessex Water in the UK
Electricity = Malaysia IPP power plants in Pasir Gudang and Paka and now includes Power Seraya in Singapore as well PT Jawa Indonesia and Electranet Australia
The report states accumulated earnings every quarter instead of the earnings for that individual quarter itself. So to get accurate earnings, you just need to subtract the current accumulated earnings with last quarters accumulated earnings. Only exception is the 1st quarter earnings which reflects 1 quarter earnings.
Here is a few I found interesting when putting the numbers into a spreadsheet.
1. Electricity revenue every quarter for the past 3 years are always below the RM300mil mark, hovering near the RM280 mil range. The latest quarter saw this number inflated to RM725 mil after including Power Seraya (PS) contribution to the bottom line. That's more than 150% increase from all the previous quarter averages for past 3 years.
2. 4th Quarter are normally strong for their water business compared to their other quarter averages regardless of currency exchange. But profit from the water business doesn't necessarily equals their revenue if you look back 6 years.
3. 2nd quarter 09 revenue of WW was badly affected by lower GBP conversions and the profits certainly shows. Similar to 3rd quarter revenue reflects roughly a 1/6 fall corresponding to the 1/6 fall in GBP exchange.
Assuming the coming 4th quarter follows the trend past 5 years for the water business, and the GBP maintains it's current rate or inch up higher, the currency conversion of Wessex Water (WW) profits would be significantly higher than the last quarter. It would probably roughly equal or exceed the revenues and profits of the 1st quarter 09.
On top of that, PS will contribute a full quarter earning to the electricity segment and profits will probably increase as well. There is no guarantee it would be significant though as we have no idea how their financial obligations have changed since the acquisition. Although the last quarterly report did mention it would be a positive contribution.
The influx of revenues from PS will no doubt press down further the local electricity contribution to their overall revenue pie and as it stands, less than 20% of total revenue. This is quite positive and generally would reduce their exposure after the expiry of their PPA in 2015 and its associated risks of not being renewed.
Another thing to look forward to would be their newly acquired oil trading business which comes with the acquisition of PS. I'm not sure how much influence it would play in part of revenue contibution or maybe even losses if it ever follow what happened to MAS. But judging from PS website of its performance in 2007/8 report, seems to be in good hands. But then YTLPOWER has never had much concern over fuel hedging before as their fuel for power business in Malaysia are subsidised. So in terms of business volatility, this one is quite unpredictable. Seems to not fit their business radar and with no prior expertise in it might be their Achilles heel.
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