YTLPOWER - YES, Shale and Beyond

Gone are the days YTLPOWER are known as the quiet dividend old man stock of yesteryear's. Their business has switch into more uncertain and possibly profitable businesses that may be the new way they are planning to spend the rest of their cash. Which is un-nerving to say the least for investors who are more interested in old man stocks.

After the Seraya Power acquisition, the group settled down to consolidate their earnings from this massive asset injection that also includes an oil trading license in Singapore. Before the dust was settled, investors noticed a cheap acquisition of a subsidiary from another sister company which recently got its hands on a WiMax license.

After some months of debate, it was revealed that WiMax would be their new venture into Malaysian's tele-communications and Internet industry. Expected to be a capital intensive industry which sees very little profits, it was said perhaps YTLPOWER was 'given' this opportunity due to it's cash generation ability. After long delays and government fines, they finally launched their service albeit a very chaotic one on Nov 18 this year. While there are still some confusion over how the payment system actually works, the service for the past month have received good reviews from the small army of customers that have signed up. Only time will tell if their service can withstand the bandwidth surge when they become popular. Though with Pay-As-You-Use model, I don't think their system will experience clogging like other providers which has a 'monthly payment, unlimited usage' model which normally attracts heavier users. Recent financial report already has a column under segmental reporting for WiMax registering a loss which is expected.

More recently though, it was reported YTLPOWER has invested up to USD 5 billion in a oil shale joint venture in Jordan. Though it was later clarified, it was only an estimated number depending on the 'feasibility' of the project in question. But it was quite disturbing since oil shale production is not only expensive and un-established, the fact that they bought up to 30% of the joint venture from an Estonian company in JORDAN! Not exactly an oil & gas destination where their industry is almost zero and Jordanians fully import their oil from war torn Iraq. But oil shale is abundant there covering almost 60% of Jordan, but producing oil from oil shales is very different from drilling for oil in the desert.

News was that the oil they expect to produced was up to 38000 barrels per day, which will be used as fuel, for a new power plant which will be built for this project which will eventually energise the Jordanian national grid. Of course, concessions for the oil, power plant project and distribution are bound to be awarded to the investors for the project. Though this will not be visible until after 2015. So technically, it is still a utility investment which is still in its very early stage. Time will tell.

Questions are how stable will this counter be knowing that the company is starting to register costs for WiMax which will slowly increase and also possible new costs in their new venture in Jordan. Will the rise in WiMax costs be too quick for their revenues to catch up thereby eating into the profits of their more stable ventures in Seraya Power? And will the new venture in Jordan which hasn't been heard until recently be their new revenue stream or money sucking pit? Profit growth from the acquisition of Seraya Power also has not overtaken their dilution so far and it is hope after the normal 1st quarter drag, EPS will improve at a faster pace. Overall YTLPOWER is seem to be expanding into the unknown and hopefully more insight is provided for the better understanding of their investments.