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. 

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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.