A Re-rating for YTL Corp in the Works?

YTL Corp (YTL) is beating its jungle drums!

Is Francis drumming up buying support for his flagship company?

He has just announced that there are potential acquisitions coming YTL's way come this year and also the likelihood of a doubling up of its dividend payout after the successful completion of its take-over of subsidiary, YTL Cement.

YTL, the best performer on Malaysia’s benchmark index this year, may buy power, cement or property assets in Asia in the next six months to expand its business in the region, according to managing director Tan Sri Francis Yeoh said.

The utilities and construction group had identified targets and might make a purchase in the second or third quarter, Yeoh, 57, said in an interview on Tuesday, declining to be more specific. The company might boost dividend payouts to the highest level in four years following its takeover of unit YTL Cement Bhd, he said.

In a Bloomberg report, Francis siad,"There are some opportunities looming for acquisitions and we’ve got a lot of good things going on. We have RM13bil cash. We can grow organically or we can acquire assets.”

A large overseas acquisition would be the first in three years for YTL, which has climbed 18% this year, compared with the FTSE Bursa Malaysia KLCI Index’s 3.6% gain. Excluding banking stocks, the group’s cash position is the second-highest after Genting Bhd, boosted by income from power generation and growth in cement production.

YTL’s cash pile put the company in a “very good” position to make purchases abroad, Yeoh said.

“I’m attracted to Asia because somehow the reservoir of money will be in Asia,” he said. “Asian currencies are predominantly undervalued compared with the US dollar. In a way, there is less risk buying Asian assets.”

YTL Power International Bhd, 45% owned by YTL, agreed in December 2008 to buy Singapore’s Power-Seraya Ltd for S$3.6bil.

Yeoh said in April last year that YTL might purchase its units if it couldn’t find suitable companies to acquire. The company made a RM1.06bil

offer in December to buy out YTL Cement through a share swap.

Yeoh declined to comment on whether there was an imminent plan to take over another subsidiary.

The company might double its dividend payout, which was 2 sen per share in the year ended June 30 (FY11), after the purchase of YTL Cement,Yeoh said. That would be the highest level since fiscal 2008.

The acquisition might add RM165mil to the group’s profit in FY12, Yeoh said, based on his calculations. Group revenue might rise to RM20bil, he said. The company had net income of RM1.03bil and sales of RM18.3bil in FY11, according to its annual report.

“By taking over YTL Cement, you would hope that you can pay more dividends to shareholders,” said Yeoh. “That would be the expectation and I think we can meet the investors’ expectation.”

I think this is the new platform for a re-rating of the mother counter of YTL Group of companies.

Watch out for a price increase when volume pick up speed and mass!