YTLPOWER 1Q 2010 Results

With the release of 1st Quarter 2010 results, I would think that all the clarification needed to see through the company easier will be available. Alas I spoke too soon. The latest quarterly report makes the numbers more murky for me and still nothing reported on their hedging operations other than required holding and inventories.


P/L / Balance sheet / Cash flow

First it looks great from the 1st line you read as the revenue grew quite a sum compared to previous quarter (not last year's 1Q beside it). But as I read further, it became clear their operations suffered somewhat a setback compared to last quarter. With only RM556 mil in operational profit which is about RM200 mil less than last Q but with higher revenue. Doesn't make sense huh. But the answer lies in the notes (B2) which states last Q revenue was higher due to a write back in fuel provisions which amounted to RM170 mil. Heh, talk about late disclosure. Shouldn't that statement be last quarter instead of this quarter to explain it?

Net profits after tax was only RM230 mil which is comparable to the time even before Seraya Power was acquired. This tells you something or someone is not quite making it in terms of profit for the group. It's as though Seraya never existed. RM230 mil is only RM10 mil more of what they made in 3rd Q 2009 with a lousy GBP conversion! And that was considered a lousy quarter. So definitely Seraya is not performing somewhat.

Not much to say about their balance sheet. They paid off some of the loans in SG and long term loan reductions looks OK but not much. Their asset and liability value fluctuates with the currency so there is no easy way to look at it. But I normally concentrate if there are big difference which indicates some sort of payment. Such as RM300 mil less in Payable but RM 200 mil more in borrowings.

Cash flow looks healthy enough from the operations contribution. Due to their higher financing requirements, they registered a negative flow of cash which normally shows a positive figure from all their warrant conversions. This quarter also reflected last Qs dividends which is RM219 mil which is low as they only proposed 3.75% last quarter. Financing activities is expected to balloon positively next quarter when the warrants 2010 are expiring in January. At the end of the day, they added more money into their bank accounts to a tune of RM 6.1 bil.

Their notes also showed they issued 2 term notes, one in GBP for 50 mil which comes to about RM 275 mil and also another in MY for RM 480 mil.

Segmental reporting

My current beef with this report is this part. This is where it all becomes muddy and blurred. Where previously, they would segment their operations by electricity, water/sewerage and investment holdings. Now the decided to separate Power Seraya into it's own segment under "Multi-Utilities" to reflect its operational status as a multi-utility player. I suppose it would make it easier to understand their operations from a distance. As each segment can be separated into Malaysia, UK and Singapore.

What I hate is that there is no further segmentation of their Singapore operations. Because Power Seraya (PS) not only generates electricity for sale, they will also sell Steam, industrial air and operate an oil trading business. Not to mention they are actively hedging their activities in terms of fuel swaps, interest swaps and exchange forwards. Thus their PS operations becomes hard to predict, as you can't tell how much each separate business in PS is affecting their overall business. For example if they made losses in the hedging part, we won't know because it is being masked by their electricity sale profits.

Looking at the segmental reporting, I can tell that Power Seraya profits are seriously lacking the boost required to pump their net profits up. It only showed 50% of what I expected it to contribute quarterly. Out of RM2.2 bil worth of revenues, they can only show for only RM59 mil in profits. Their revenues I suspect are inflated by their oil trading activities which includes buying and selling kilo tonnes of fuel to earn a small profit by the margin of difference. Lower profits could also be explained by their increased financing responsibilities.

Malaysia electricity operations are always on full steam so their results are normally due to the efficiency of running at full capacity. It's revenues are quite comparable to previous quarters but the profits are lower by about 20%.

UK operations are also weak this quarter compared to GBP exchange where GBP depreciated 5% BUT their profits dropped RM100 mil or 39% to RM159 mil. To compare some more, when the GBP was weakest in 3rd Q 2009, Wessex Water actually earned RM180 mil. So definitely not up to par compared with other quarters if currency exchange is not concerned.

Now I'm not saying its the end of the world, YTLPOWER 1st Quarter results are always on the lower end of the spectrum out of 4 quarters in a year in the last 5 years. So this can be due to multitude of reasons from re-valuating assets, financial obligations and consolidation of accounts.

But the best part of this report was the proposed dividend of 7.5% which harks back to previous quarters interim results. Definitely a welcome relief ever since last quarter they announced only 3.75% interim. Hopefully, it can be incrementally higher in coming quarters.


Wish List

What I would like to see were the segmented business reporting for their Singapore operations like how PS website reports it. It shows how each business is making money and how important they are to the business core which is utilities.

Most important is their hedging/swapping operations and how good a job they are doing there.

Repayment schedules of term loans or at least a mention of how much they paid and when.

Higher dividends to reflect the additional profits that somehow PS is not delivering.

Maxis IPO results

Well surprising results for me, as I got all my applied shares from the Public option aka White form application and NONE from the Blue form which is only for Maxis subscribers.

Lots of people are disappointed for not getting any, especially disappointed are those applying from the Blue form. I mean I'm more disappointed from not getting from my Blue form compared to what I've got from my White form. Maybe due to the expectations that the Blue form application are assumed to be almost guaranteed 'success'.

Even broking houses are not spared the despair of not getting any allocation they bid for. A fund actually rejected their allocated portion because it was too small and the costs is not worth the effort. Though most complained of their small portions, some are delighted they got a share and due to shortage of allocation for all funds, they expect the share to appreciate higher.

Well at the end of the day the markets will determined how high or low Maxis will go. Hopefully I can unload a few before the 1st day is out.

MAXIS - Mother of all IPOs

Well whatever I want to say is all stated in the local news already. Other than the very optimistic analysis of local broking houses, there hasn't been any negative news on the IPO other than lack of public shares for allotments compared to institutional offerings.

Considered expensive in terms of PER for an IPO and also compared to other listed telcos, analyst has been hyping up the IPO and the premium due to their market leader status. And also the fact that they will be included in the KLCI index on No 20th. Their listing date is the 19th of Nov.

I tried my luck in this IPO and got all the shares applied which was a great surprise to me. Now this is the public offer, not those 50k minimum institutional offers which some brokers provide. My Blue form application for 1k shares status is unknown for now but I think I'll be getting that too. Reason being the public IPO was not overly subscribe, only by 2 times.

Normally I suck in IPOs. Which is why I normally apply for more than I'm willing to hold. So it did got me worried that the extra shares I applied suddenly got handed to me. Though it's not like I can't afford it, but I did not appreciate the extra risks taken now compared to half of what I originally intended to hold. I wonder if anyone else feels the same.

Anyway with that said, I'm planning to sell half of what I've got so I get back to my original intended holding. Best time to do it I suppose would be listing day. Hopefully the market will 'goreng' it up a little. But I'll be happy to sell it for anything above RM5.00 per share, of course more would be nice. Hehe.

Overall the IPO generated more institutional investor interests than retailers, most likely due to the higher price per share. Don't think I've seen an IPO for more than RM5 per share before. Well my only hope now is that the counter doesn't tank on listing day.

Reason why I applied for Maxis IPO probably dates back to the time when it was first listed. At that time I saved some cash already and was prepared to apply for the IPO then, but work commitments kept me out of the country and I was unable to get a chance to apply. I kicked myself over it because I did not have any contingency to do it. Which is why for this IPO, I was already well prepared even though I was a bit skeptical about any truth in the rumors of it being listed again. Wasn't expecting the Blue form application which made me run around a bit, but it was all good.

Now just waiting for Nov 19th.