More Buy-backs into YTL Cement?

YTL Corp Bhd may choose to buy subsidiary YTL Cement Bhd if there are not many attractive merger and acquisition (M&A) opportunities in the market, says an analyst.

“The group might be eyeing YTL Cement because of the low liquidity,” she told StarBizWeek yesterday. YTL Corp has a 50.1% stake in YTL Cement.

YTL Corp’s  Francis Yeoh had said that if there is nothing attractive, they may buy more into their own subsidiaries with some of the war chest cash reserve of RM12 billion.

YTL Corp is focussing on purchasing businesses of the infrastructure-type like water, electricity and transport and expanding its cement footprint.

Other subsidiaries under the group include YTL Land & Development Bhd and YTL Power Power Int Bhd.
At the EGM, the group said it was eyeing “sizeable acquisitions” as subsidiaries under the YTL group had restructured their balance sheets and were now “strong enough” to pay out consistent and substantial dividends.

Yeoh said the amount would be as much as RM1bil in dividends from its subsidiaries for its current financial year ending June 30, 2011.

“YTL Corp will be able to get RM1bil per year from now from our subsidiaries. With the restructuring and dividends, we can easily look at sizeable M&A opportunities,” he said.

YTL Cement, commanding about 30% of market share, is the second largest cement manufacturer in Malaysia after Lafarge Malayan Cement Bhd.

YTL-The RM 12 Billion War Chest

If there is any share worth considering now on the Bursa, it must be YTL Corp.For one, it has a cash horde in reserve even bigger then Genting Malaysia! Imagine RM12 billion for M&A and focusing on strategic buys globally! MD Francis Yeoh termed these as 'sizeable acquisitions' in infrastructure-related business.

Francis added that subsidiaries under the YTL group had restructured their balance sheets and were now “strong enough” to pay out consistent and substantial dividends. In fact, it is waiting for a whopping RM1 billion just from dividends alone from its subsidiaries for the year ending June 30, 2011.

“YTL Corp will be able to get RM1bil per year from now from our subsidiaries. With the restructuring and dividends, we can easily look at sizeable M&A (mergers and acquisitions) opportunities,” he told reporters after the company EGM yesterday.

Yeoh said YTL Corp would be eyeing acquisitions primarily in water, electricity and transportation-related businesses.

“We will concentrate on those kinds of businesses that we’re familiar with. We will also be expanding our cement footprint,” he said, adding that YTL Corp had an (unencumbered) cash level of RM12bil that it could utilise for acquisition purposes.

According to Yeoh, the YTL group had intentionally backed off from M&As from 2008 to 2010.

“From 2008 to 2010, there was a lot of liquidity in the stock market and commodities but everything was overpriced and (it was) very difficult to put our money to work and get reasonable returns.

“To me, deals were not rightly priced in terms of returns of interests, so that explains the lack of big M&A opportunities from 2008 to 2010.” He added that the group had been seeing “very interesting deals that can be considered in every area of our business.”

“We expect (unit) YTL Construction to be very busy now with the ETP (Economic Transformation Programme),” said Yeoh.

So, I think YTL will fetch a very good price when it converts into 10 sen share comes 26 April 2011. Going by my estimation, at today's price of RM7.70, it should work out to RM1.54 per lot.

I can easily see the share moving past RM 2.00 in no time.

PS: On 29 April, YTL shares was just hovering about RM1.66, short of 34 sen to the possible target of RM2.00.