LTE on YTLP's Yes network (and possibly iPhone?)

Summary: YTL Yes' CEO: "We will be adding LTE... For us, adding LTE is as simple as adding a channel card". Expects Yes to be profitable 18 months from now.

Very interesting article. 

YTL CEO Wing Lee bets on 4G in Malaysia (Q&A) (Cnet)

YTL's network operates on the 2.6Ghz frequency, just noticed on Apple's website that the new iPhone 5S and 5C that landed on our shore (Model A1529 and A1530) support these 2.6Ghz frequency. Not saying that we will see iPhone on Yes anytime soon, but the possibility is at least now technically feasible.

I think there's easy money still to be made buying YTLP at the current level. 

Malaysia small cap highlight - Weida

Summary: Weida is a bargain given its growth outlook. My projected earning for the company (based on management guidance in the news) is RM74 Million, based on today's market capitalisation of RM 225 million, the PE will be about 3X.

Weida is currently one of my favourite local counter for its conservative balance sheet and attractive valuation. I have previously posted about them.

Based on its 2nd quarter result announcement, the company have a net asset of $2.75. Currently it's trading at 1.74 giving them a price to book value of 0.632.

There was an interesting interview given by the managing director of the company, Datuk Lee Choon Chin in The Edge back in September 2013. In it, the MD highlighted its 5 years growth plan including some detail about the expected profit from its property development venture. I've broken down his projection to this simple spreadsheet below:-

I've taken a very simplistic view of the expected profit from these project.

The property project are expected to have a net margin of about 20-22%, based on 20% margin, the property development is likely to earn Weida RM112M.

Weida have "long-term contracts leasing the group's own telecoms towers" to prominent telco including Maxis, Digi and Celcom. "The estimated net rental income in the next 5 years will be about RM 70 million", the MD was quoted to have said.

Water sector - Weida have fixed income from long-term contracts for the management, operations and maintenance of 3 septic sludge treatment plants in Kuching, Sibu and Miri. The concession period for each of these is 25 years. "The estimated concession income in the next 5 years will be about RM 60 million"

Based on the above details, the company is expected to earn a total of RM242M from these 3 business segment in the next five years, or an average of RM48.4M.

The company currently operate in these 4 business segment:-

The manufacturing segment is currently its biggest segment where they specialise in "polyethylene-based building material". According to the article, the company have allocated over RM100M in capex to double its capacity from 20k tonnes/annum to 50k tonnes per annum. The existing plants are running between 70%-80%.

Based on its most recent result announcement, its manufacturing division contributed RM12.8M in the 6 month to June 2013. Assuming a flat earning (despite increasing capex) I expect the manufacturing segment to contribute an annualised earning of RM25.6M.

Based on the above rationale, I expect the company to be earning somewhere around an average of RM74M for the next five years. (3 division projected growth in the article plus flat earning from manufacturing). Its current average earning for the last 5 years is about RM30M.

Currently the company have a market capitalisation of RM225.33 M. This is a PE of 3 based on my estimated earning for the next five years.

The company's have shown increasing revenue and earning over the past five years and the share price have strengthened over the last five years as a result too. But I believe the share still have significant upside in the long run due to its growth orientation in the capacity investment as well as the property venture.

Look for opportunity to add this to your portfolio, I am hoping for a pullback for more opportunity to add to this. It is good value based on current earning and a bargain with the growth.

Land & General - Q2 result

L&G announced a rather impressive set of result on 20th November. The company is trading at price below net cash per share.

The earning per share of the quarter is 3.86 cents or 5.6 cents for the half year to date. 

Simply annualising the quarterly and half-yearly will yield us an annual EPS of 15.44 and 11.2 respectively.

However - earning from property development can be rather "lumpy" due to the nature of its progressive billing, the EPS calculation can't be reliably extrapolated from the historical EPS.

The company have RM293M in cash and approximately RM14M in borrowings - giving them a net cash of RM279M. The market capitalisation is currently RM 248M. The company is trading below its net cash per share.

L&G ICULS is trading at 0.28 cents - up more than 100% from the initial price of 0.13 cents. However I think it still offer value at this price hence I won't be selling. But the easy money would've been made, this is one I will be holding onto for awhile longer.

I am hoping that L&G mother share will hit 70 cents giving a market cap of approximately RM416M.

IBM - accumulating.

I've been accumulating IBM since its last earning report. At its last close it's trading at USD176.08.

The company's stock price have taken a beating due to limited revenue growth in past 2 quarters, but I believe the lack of sales growth is due to the company shedding some high value, low margin hardware business.

Wall street is not paying much attention to this share, and its forward earning is around 10x PE. Paying out a decent 2.16% dividend.

I believe the market is underestimating the innovation coming out of IBM because they can't understand it - just take a look at Watson and do your best to guesstimate the potential, my gut feeling is that this product will be HUGE and more than enough to offset any earning decline in its traditional hardware business.

It's a top investment in Berkshire Hathaway and Mr. Buffett himself praised IBM after its share slump.  I think if your portfolio include shares in the US, you should look at adding some to your position. 

I will accumulate gradually below USD 180, the next earning release may not do the share price much good but I think this is a solid blue chip company for my portfolio for  5-10 years.

YTL Power 2014 forecast

I revisited my initial post on YTLP back in Jan 2013, in it I forecasted 2013 profit to be 1.33B, it came in at 1.33B.

For 2014, I've forecasted a slightly lower adjusted profit of 1.28B and with the lower share count, the adjusted EPS is forecasted to be 0.19cent.

Based on historical Y/E PE range of 9.2 to 11.28, the expected price range would be 1.75 to 2.14. The industry segment PE according to reuters is 15.88, giving a share price of 3.01.  

Based on hsitorical trading range of 10x-16x PE, YTLP's share is worth RM1.9 to RM3.04

YTLP Q1 2014

Summary: YTLP announced a rather ordinary set of result with a 60M drop in profit due to a rather mystifying bunch of impairment. 43M impairment in receivable and 24M impairment in investment in associate. There is no detail on these impairment.


YTLP announced its Q1 result on 21 Nov 2013.

I still LOVE the strength of its operating cashflow and free cashflow! Instead of spending it on on dividend, they have been buying back their shares - ceteris paribus, this is awesome for its warrant holder.

Ok, back to the current result.

Overall the group result is down by about 60M compared quarter to quarter. This is mainly due to the decline in the merchant and investment holding segment offset by an improvement in the water & sewerage segment. The IPP and mobile broadband segment shows marginal improvement in its result.

Power Generation

Improvement is due to increase volume. IPP contract will expire soon, hence expect contribution to tail off in 2017.

Merchant

The merchant segment experienced a decrease in revenue and a corresponding drop in profit. With the intensifying of competition in the Singapore electricity market the margin is also suffering.

Water & Sewerage

Rate was allowed to increase by 6% from April 2012, but I believe the recent strength could also be due to the appreciation in GBP to 5.2 from about 4.8.

Mobile
More customer, less losses. LTE implementation is rather simple for its network, its rollout could be a major boost.

Investment holding
This is the most interesting part of the result, with a 100M loss for the quarter.

Impairment in associate is only 24M. However there's a 43M in receivable impairment and 14M in inventory obsolescence. There's no further detail on this impairment of receivable.

These are YTLP's associate per their annual report. The mobile division is considered a subsidiary.

I don't know what's the detail relating to the impairment and the lack of transparency on this rather material figure is not great.

The valuation for the company is still rather undemanding, sentiment for the company may improve if they successfully bid for the IPP contract but its contribution is likely to be minimal given the size of the current YTLP's offshore business.

YTLP-WB

On the 23rd September I posted a recommendation to add YTLP-WB to your portfolio.

It traded at 51.5 cent that day.

Today I've just disposed off some of my YTLP-WB at 80.5 cent.

In the 2 month period since my recommendation, YTLP-WB have risen 29 cents or 57%.

I will still retain the vast majority of my WB at this stage. I believe the valuation for YTLP is undemanding given its resilient cashflow and the strong buyback being executed by the management.

If you are holding onto some WB, I suggest you take some profit at this stage - the upcoming earning announcement might take some air out of its recent momentum.

China Stationery Limited - oddity

Mr. Tong have kindly enlightened us in his article of some rather odd peculiarity in the company, an excerpt can be found below with a relevant link.

Link

I've attempted to draw the attention of Bursa to this article and hope they will compel the company to answer queries raised in the article.

The relevant person in charge of this company is: Tang Eng Kean <tangengkean@bursamalaysia.com>

Do drop them an email if you are a minority shareholder and is as concerned as I am.

Demise of the China Stationary CEO

First of its kind change of boardroom report I read

Question is when did he actually pass?

YTLP - update from 23 September

In the 2 weeks since my last post on 23 September on YTLP buyback, they company have been continuing its rather aggressive buyback program.

As of 7th October, the company have cumulative treasury share of 218,103,045 shares - with its latest buyback at price between 1.80-1.82.

This represent an increase of 126,582,500 shares from my last update 2 weeks ago. Assuming an average price of 1.75, this buyback is worth approximately RM220million.

All in 14 days.


YTLP-WB is trading at 0.56 and YTLP is trading at 1.82.

China Stationary - buying by company selling by owner.

Following my post of China Stationary Limited on 31 May 2013, the price of CSL have dropped from 0.35 to 0.20 currently (42% drop!).

While this experiment of mine in China share have not panned out too well (my average price is 0.305) I found their latest move to be quiet perplexing.

1) Majority shareholder selling out
The majority shareholder have recently been disposing of its share in a series of transaction. The majority shareholder's latest shareholding today is approximately 30.8%, down from 66.9% in January.

2) Buyback
The company have initiated a buyback recently with the purchase of 9M shares at 0.205 last week. I don't know how to analyse this latest move but a buyback at this price is definitely accretive to shareholder - I hope the company will undertake more buyback.

Based on the net cash position of the company, the disposal by majority shareholder defies logic. It suggest that the majority shareholder think the company is less worth than the amount of cash the company claim to have.

The buyback and the disposal is opposite move by what essentially is the same set of players in this game, this exercise contrast with the move by YTLP.

I will retain my small portfolio of CSL - but would not care to add to them. My gut feeling is telling me to cut loss, yet I remain curious about the contrasting move by the management.

YTLP buyback update

Since my last post on YTLP's buyback program back in May, something interesting have just occurred.

On the 28th August 2013, they cancelled a total of 250,000,000 treasury shares, while retaining 9,005,945 shares in treasury.

Based on my last post, they had a total of 137M treasury shares as of 9th May, giving a net buyback of around 122M shares in 4 months period. Using an average share price of around $1.60, this buyback is worth over RM200M.

"On 9/5/2013 - the company have approximately 137,324,245 treasury share outstanding representing approximately 1.86% of the total outstanding share."

Since then, the company have continued with their buyback program. As of today - they have a net cumulative treasury shares of 91,520,545 shares representing a net buyback of 82M in this month alone. This buyback is worth approximately RM135M using an average share price of $1.60.

Cumulatively since March 2013, the company have bought back approximately RM452M worth of its own shares. 

Tan Sri Francis Yeoh have repeatedly mentioned that YTLP is undervalued - this latest move is an affirmation of his view. For long term investor - buying a blue chip company with resilient cash-flow at price close to its 9 years can't really go wrong - in my opinion.

If you have available cash, I suggest you add this to your portfolio.

However, rather than going straight into its shares - consider YTLP-WB, its conversion price is RM1.21 and a long tenure (2018).

YTLP-WB is trading at 0.515, YTLP is trading at 1.77

Why money printing does not lead to a debasement of currency

I just read a very interesting blog post by Dali on the debasement of currency caused by all the money printing. 

My initial conclusion back in 2010 at the inception of these printing was the same.. it's going to be as inflationary as in Germany post WW1. However 5 years following the first QE, there's still no inflation..  then I came across some smart economist pointing out that all these extra money is basically absorbed by the bank in increase reserve.. it make sense, if the money printing were to be inflationary - the effect should have been apparent almost immediately.

I put forward an alternate view to why money printing is not inflationary.

An alternate view

Econ 101 taught us printing of money lead to increase supply which will lead to a debasement of the currency.

HOWEVER

- Quantitative easing is merely a form of monetary policy that increases LIQUIDITY in the banking system.

- Liquidity of the banking system is separate and distinct from credit growth and availability. The monetary policy can only influence the PRICE of the lending.

How monetary transmission mechanism work in reality

- Despite the printing of money in the last few years by the treasury, money supply have been relatively stable and inflation in check.

- The main determinant of credit growth is RISK APPETITE: whether banks want to lend and whether companies/consumer want to borrow. Companies are hoarding a record amount of cash.

- According to Bernanke, the objective of QE is to maintain low long term interest rate

 

Bernanke August 2010 speech

- A byproduct of this low rate is a gradual healing of household balance sheet in the US and of the government itself

- Reality is that quantitative easing merely swaps bank reserves for US treasury

Interesting read:

1) http://www.voxeu.org/article/central-bank-reserve-creation-era-negative-money-multipliers
2) http://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf

Boustead REIT privatisation

Interesting news about the privatisation of Boustead REIT, I've written about it previously here.

Based on the announcement,Boustead Plantation Berhad had offered RM 2.1 for each unit of the REIT. This represent a premium over the NAV and the recent trading price.

Considering the direction of the CPO price going forward, it's not a bad deal for the unitholder. However - it's not easy to find a replacement for such a conservative dividend paymaster to replace Boustead Reit it one's portfolio.

The way the REIT is structured, there is minimal downside risk to the dividend due to the presence of the fixed rent portion in the rent formula.

I am guessing with the soft CPO price, the power to be in Boustead group figure it's costing them too much to be paying rent to the individual unitholder. They are better off terminating the lease agreement and taking the plantation asset in house, financed through debt alone.

Like I mentioned earlier in my last post - I don't have very much of these REIT left, yet I can't justify selling them as I am not too sure what to replace them with. Despite this, the premium proposed represent about 2 year's worth of dividend yield for the REIT, as such I MAY consider supporting the proposal. But I really should look harder at some replacement candidate.

To all other unitholder - what's your view? And if you accept the offer - what would you replace the REIT with?

Herbalife - closed my position with 86% gain in 7 months.

I went long on HLF on Dec 28th publicly in my 2nd blog post.

My entry price was below USD 28.

Last night I exited the counter at USD 52.09.

In less than 7 month the position was up USD 24.09 or 86%.

I think the stock still have upside to it, but I think there's alot of volatility to this counter. I may be looking to enter a trading position from time to time as it does not appear that FTC will be shutting them down anytime soon.

China Stationary - how to value this company?

From a traditional valuation matrix, China Stationary is screaming value value value! But for the "China" factor.. it should be worth a hell of alot more.

Based on its 2012 audited account and its Q1 2013 result announcement, I see a few very attractive point about the company:

1) Strong net operational cashflow generation 
Approximately RM291 million in FY 2012 [and RM79 million in Q1 2013 (RM316M annualised)] against RM33million in investing cashflow giving it approximately RM258 million in free cash flow per annum..

2) Strong balance sheet... 
Its audited cash balance at 31 December 2012 is approximately RM 944 million against total liability of approximately RM110 million, giving a net cash position of RM 834 million. There's also various receivable, inventory, fixed asset.. but for the purpose of this exercise I've assumed no recoverable value from these assets.

3) Dividend 
Based on its short track record listed on Bursa, they've been paying regular dividend... 0.018 interim dividend was granted back in October 2012 and another 0.016 will be approved as final dividend.. giving a total dividend of 0.034, which is a yield of approximately 9.7% based on the current price of approximately 0.35.

These dividend are paid out of operational cashflow.

4) Earning yield
Based on 2012 audited account, the company generated approximately RM232million of profit. Based on current price of RM0.35, the PE is less than 1.9X.

5) Discount against IPO price.
It was listed back in Feb 2012 at RM0.95 which is approximately 4.75X historic PE. Current price is only 0.35.

6) Active purchase by major shareholder in open market.
There have also been a series of purchase by its major shareholder from the open market.. however this is also a downside, based on 2011 annual report, the free float of the share is way below 30%....


Conclusion - I don't generally like companies with poor corporate governance issue. But just like how you can overpay for a good company, there should be a price where a lousy company can be a good buy. Well that's the theory anyway, I have bought a little bit of this counter but with a very experimental mindset to this investment.

It's so cheap I can't understand it.

YTLP buyback -update

Following my last post on YTLP buyback, the company have continued to be active in the market to buyback its share.

Its cumulative net outstanding treasury share as of 30 May 2013 is 166,347,745 shares.

On 9/5/2013 - the company have approximately 137,324,245 treasury share outstanding representing approximately 1.86% of the total outstanding share.

This represent an additional buyback of 29,023,500 shares from the open market. Assuming at an average price of RM1.51, the buyback is worth RM43,825,485 this month.

Today's announcement.

Weida - Q4 2013 announcement

Following my post on Weida back in February 2013 the share price have been pretty unexciting until the past 2 weeks following the general election result when it finally broke 1.40 to trade around 1.70.

Anyway, getting back to the fundamental.. the company have just announced its Q4 2013 result and I believe it is looking very solid.

After receiving the proceed from the disposal of its plantation land, the company is now sitting on a cash balance of RM264 million, it's market cap is approximately RM 225million as of closing today.

It's net asset is RM2.74 and current closing price is RM1.71, giving a PB of 0.62

Earning from continuing operation is approximately RM20 million, giving it a PE of approximately 11X.

Actually I was expecting more cash proceed from the disposal, having looked at the circular again I am not really sure where I missed out. Per the circular, the expected gain on disposal is RM120+million, however I can only find a RM60million gain on the 12 months P&L. Something doesn't seem consistent with the equity account presented in the circular against the current quarter announcement..
But the mistake is probably mine.

Nevertheless, given the company's upcoming venture into property development and its solid foundation in its current business, I think Weida is a decent inclusion in my portfolio at this stage. I will look to par down some stake somewhere around RM2.50 (0.9 to PB/15XPE)..

YTLP's 4G push - a perspective from its CEO.

Great article in The Edge today shedding some light on the 4G's push by YTLP.

Basically the rollout delay is a calculated one due to limited ecosystem for devices operating in the 2.6Ghz spectrum (iPhone operate on 1.8gHz spectrum).

China and India have indicated that they will operate on the 2.6gHz spectrum but they have not started auctioning the spectrum.

Interestingly the CEO was quoted to have said that they are ready to deploy LTE on its WiMAX network. My hope as an investor is that their WiMax network is LTE ready without another round of heavy capital expenditure.

YTL Power - buyback mode worth RM116million since March 2013.

Over the past 3 months, I've not actively kept track of my holding in YTLP. With the election fever in the past months, the stock have not been terribly active.

However, having looked at the counter earlier today, I notice substantial share repurchase by the company since 4 March 2013.

On 4/3/2013 - the company have approximately 56,725,145 treasury share outstanding representing approximately 0.8% of total outstanding share.

On 9/5/2013 - the company have approximately 137,324,245 treasury share outstanding representing approximately 1.86% of the total outstanding share.

This represent a net purchase of approximately 80,599,100 shares. Assuming an average purchase price of 1.45 - this represent a buyback worth RM116,868,695. 

I view this development as a very positive move for minority shareholder as it will increase EPS assuming no change in operating environment.

The company generate > RM2b in operational cashflow annually. They can certainly afford to buy back more shares at this price. 

Land & General Berhad - subscribe or be diluted - the ICULS dilemma.

SUMMARY: L&G have a cash horde of RM159M yet proposed a ICULS issue to raise RM77.8M to fund the purchase of a 14 storey office space in Putrajaya @RM575psf. This rights issue may potentially dilute current shareholder's holding by up to 50%.


L&G recently proposed a RM 77,779,589 renounceable rights issue of five years, 1%, ICULS at RM0.13 each for every ordinary share of L&G.

Translation: 
- Each shareholder will be entitled to subscribe for a convertible loan stock paying 1% interest, convertible at anytime within 5 years of issuance.
- The proceed of the rights issue will be used primarily for the purchase of a 13 storey strata office building being constructed in Putrajaya. (edit: apparently the vendor of the office block is a related party according to Focus news article 2 weeks back.)
- The ICULS may be converted in 2 manner; 1) by surrendering 2 ICULS for 1 L&G share, or 2)by surrending 1 ICULS and RM 0.13  for 1 L&G shares. Basically the ICULS can be converted to shares at RM0.26, regardless whether ICULS or cash is used to top up the conversion at a later date.

Impact:
Due to the 2 different methods for conversion (cash and ICULS), the impact on potential dilution cannot be determined beforehand. A illustration was provided in the announcement to illustrate the potential dilutive impact of this exercise.

Based on this illustration, we can foresee a potential dilution of between 25% to 50% for existing shares.

From a share base of 598,304,530, the number of issued shares can potentially double to 1,196,609,060!!!




Does L&G need the ICULS?
Based on the latest available result, L&G holds approximately RM159M, and is generating a steady operational cashflow of RM35M in the 9 months to December 2012. This cashflow is expected to remain (if not strengthen) due to the strong sale at its Elements and Foresta project in Kuala Lumpur.

'

Analysis
I personally like the profitability outlook on the company for its current stable of project. The strong sales achieved in its current projects namely Foresta and Elements provided me with this confidence to invest in the company. Its current market cap is approximately RM 245M and based on previous announcement, the company can expect a profit of approximately RM120M for its 50% state in the Elements project alone.

It is also rather odd to me for L&G with its strong development expertise to be purchasing a strata office. The purchase price is RM 575psf, why can't L&G's management purchase a plot of land and built the structure themselves? 

Not being particularly familiar with the value for Putrajaya, I consulted some listing for offices in Putrajaya and found space to be listed for around RM 300 psf only. Note I am not a valuer. But I am not terribly excited with the proposed use of fund.

Conclusion
- Earning dilution is a reality for this proposed rights issue.
- The company may not really need the cash given its healthy cash horde of RM 150M.
- Even if the cash is needed elsewhere, does it really make alot of sense to suffer a dilution of up to 50% in return for a 13 storey office space in Putrajaya? I reckon no.
- However, if the proposal is adopted - I would subscribe, simply because I don't want to be further diluted.


Edit: If you are a minority shareholder keen on voting against this, do get in touch with me. Perhaps we can pool our vote/voice.

Weida - boost from net disposal gain.

Weida - it's got a market cap of approximately RM 188M.
It has been paying a boring annual dividend of approximately 4 cents
Currently trade at about 6xPE.

Just received the shareholder circular on the proposed disposal of its stake in its palm oil subsidiary for approximately RM 151M recording a net gain on disposal of about RM 121.15 million (over its RM188 market cap).

It's got 133.33 shares outstanding - the net gain per share will be approximately 91 cents.

Looking at its proforma balance sheet as at 31 March 2012, the NA per share will increase from RM1.6 to RM 2.56

Their EPS have been growing at an annual rate of approximately 12.5% from 8 cents in 2009 to approximately 19 cents in 2012.

Well worth a look at. 

They've also recently announced a JV for a property development venture.

Essays by Buffett

Quiet an interesting read... his view on value & investing.

Should take a look.

Value Traps

Came across an interesting article by Dali on value traps, it identifies companies with trading price significantly below its NTA value and the rationale behind them (lack of catalyst).

While many investors knows the term value trap, it is perhaps hard to tell a value share apart from a value trap.

In my short investment life, I've focused on the discovery of value share - those that tick all of Graham's criteria for value. But recent lessons has made me reevaluate my approach in investment.

Here's an excerpt from Buffett's annual letter to investor:

So if value is not the key to a successful portfolio then what is? Investment is not an easy game to play afterall!

Revisiting YTL Cement privatisation

Summary - this is my rant about how YTLC minority could have gotten a better deal if they've stayed listed & YTLP shareholder shouldn't get too excited about attempt to privatise through share swap

(Dedicated to HNG :P)
----------

YTL privatisation - is it a good deal for minority? A lot of commentators before me have pointed out it's a raw deal to minority who have invested in a business hoping for a payday when the company is more profitable.

Intrinsic value

I am of the opinion that shareholder gets better intrinsic value by holding a pure-play cement counter rather than holding a conglomerate counter like YTL. If I want to hold YTL, I would have went out to buy their shares - no thanks for forcing me to be a shareholder. In YTLP's case, I say no thanks to any privatisation attempt through share swap with no acquisition premium. YTLP's underlying holding is far superior than YTL's mix pot of assets.

Earning growth

As noted in my last post, YTLC's earning is up 41% is its latest announced quarter. No doubt by privatising it, YTL have managed to plug the cashflow leakage to minority shareholder, thereby maximising the cashflow for its own benefit. Assuming the same PE multiples, the increase bottomline will directly mean a better underlying share price. Those YTLC shareholder that bought in at over RM5 would know.

Currently Malaysia is going through a huge construction upswing, with cement sector doing particularly well. What would the effect be if YTLC stay listed? We can look at Lafarge for a comparison.

It's up approximately 48%! YTL's management are not stupid to privatise an overvalued assets, they are among the smartest team of management in Malaysia with their ability to buy distressed asset and turn them around profitably.

Dividend payout?

Althought YTLP and YTL is paying the same absolute dividend at the moment - YTLP's cashflow generation rate allows them to pay a far higher dividend then what YTL is capable of. This is by virtue of their current cash horde of RM10B - along with their cash generation ability. The lowering of dividend is a conscious management decision and not forced upon them by any external difficulty.

Much of YTL's cash horde of RM 12B (I believe) lies in YTLP. The estimated figure is $10B out of the RM12B sits at the subsidiary level. They could get to it by doing an intercompany loan (look at L&G), payout a dividend, or privatise YTLP then payout a dividend.

Looking at their history with YTLC - in hoarding cash then privatising it without EGM - I hope they will keep YTLP listed and increase the payout. But I can only speculate.

Likelihood of privatisation & EGM

Unlike the YTLC privatisation where a waiver of EGM requirement allows them to carry out the share swap it is extremely unlikely for a similar situation to happen in YTLP's case.

YTL despite its frequent rhetoric on its desire to privatise YTLP has recently made a massive grant of WB to YTL's shareholder - my initial suspicion was a privatisation attempt. But Felicity of Intellecpoint has pointed out it's extremely unlikely for them to give out WB at a discount then buy it back at a premium - just doesn't make sense.

In the event that they do attempt to privatise, waiver is unlikely to be given as shares required to be issued will exceed the 10% threshold. But this only applies at YTL level - as YTL shareholder, of course I will support the deal. YTLP's EGM situation is more murky. I am not too sure what's the effect of the mandatory takeover code on such privatisation attempt - if there's anyone that's an expert do chirp in.

I would speculate that an attempt to privatise will be conducted through another private vehicle not part of YTL's group of company. Simply because despite the value of YTLP - it doesn't make sense for YTL to give out discounted warrant and then purchase it back at a premium. 

Makes more sense to give out discounted warrant and allow a private party to purchase it back in the market at the depressed pricing.

Excerpt of news article on privatisation of YTLC

YTL Corp Berhad - Massive buyback program

Summary: YTL share price have been well supported through a massive share buyback program amounting to over RM600 million over the past 12 months. 

However underlying earning have also improved, primarily due to favourable results in its Cement segment. Quarterly earnings at YTLC increased by approximately 41% or RM 50 mil. 

--------

YTL Corp's share have been on a tear lately. The price shot up from its trading range of around RM 1.4 to RM1.6 to eventually trade above RM 2 before currently trading at RM1.80. Representing an appreciation of almost 29% (40 cents up from 1.40).

It's currently trading at approximately 12x forward PE (based on annualised Q1 earning) or 15x historic PE. 

If you review their P&L, you won't find anything extraordinary to warrant these price movement I reckon.. net income went up from 1.03B to 1.18B - roughly a 10% increase.

Its EPS and DPS figure shows improvement but is it really the cause of the appreciation??

EPS went up from 0.11 to 0.12 cents in last 12 months - about 9% increase. 

YTL Cement

Since their delisting in April 2012 after privatisation, the YTL Cement unit have achieved a 41% jump in quarterly profit. I wonder what would the price be if they were still traded. This result announcement was around June/August 2012.. YTL's price declined from RM2 since this result announcement.

 Based on current quarter earning, Net income is 392M or EPS @ .04 (.16 annualised) - approximately 33% increase from prior year's EPS of 0.12.

Based on segmented result at 30/Sept 2012 - it seems that the biggest contribution to the net income increase is YTL Cement and management service. 

MASSIVE buybacks

In the past month alone YTL repurchased approximately 15.4M shares amounting to approximately RM 29M through share buybacks.

Since January 2012 - their total buybacks amount to 361,850,700 units. 

(Looking at 15 Jan 2012 buyback announcement and 16 Jan 2013 buyback announcement - taking into consideration distribution of treasury shares in July 2012 of 647M shares)

The cash outflow from buybacks is pretty significant, in FY 2012 they spent over RM 500 M in buybacks. More than on distribution of dividends.

Given that they have continued repurchasing shares since its financial year end, I would estimate the total amount spent on repurchase of shares to exceed RM 600 M. Given that the share price movement does not track the result announcement, I would assume this massive buyback is the primary cause of the price increase. 

Implication?

YTLP's price is depressed due to a massive supply of discounted WB granted by YTL. If an attempt to privatise YTLP through shareswap as claimed by many analyst, then the minority shareholder of YTLP would be giving up share in a depressed YTLP (with potential catalyst) for a share that's trading 30% higher than its trading range on the back of a massive share buyback scheme.