Pumping Up YTL Corp

At the last AGM in late November 2010, MD Francis Yeoh advised shareholders not to sell off their YTL Corp (YTL) shares . The AGM attendees were told that the YTL shares were undervalued. Definite plans will definitely afoot to realise the real value of  YTL shares.

There was speculation galore in the street rumours as well as market punters on how Francis will shore up prices.Some thought YTL will be considering strategic M&As buy-ins. Yet, until the EGM on 14 April, there  not a squeak from Francis. So what gives?

Every one knew that YTL has one of the biggest cash horde on this side of the  non-GLC corporate world. At that time, its cash reserves was a whopping RM10 billion, far more than Genting Malaysia's RM 2 billion.

At the EGM, Francis informs the meeting that now their cash reserves have gone up to RM12 billion! He added that the last two years were not good years for M&As. And most offers were too expensive to consider. If none appears on the horizon soon, YTL may just consider buying up more shares in its own strategic subsidiary, YTL Cement which is moving very close to the RM5 market price.

After long month of dull and listless trading, YTL shares finally rested at the RM7.20 price level for the issue of the share-split documents to its shareholders.For every existing RM50 sen share, 5 sub-divided shares at RM0.10 will be issued. This puts the ex-price of YTL at RM1.42 per share.

On 26 April 2011, YTL shares will be traded ex-split offer. The last date of lodgement is 28 April 2011.

As such, all shareholders will have YTL new shares deposited in their CDS account on 29 April 2011. However, those who want can start selling their new shares beginning 26 April 2011.

Here is an example taken from its announcement to Bursa.

"For example, if Mr X purchases 100 YTL shares on cum basis on 25 April 2011, Mr X should receive 100
shares on 28 April 2011. As a result of the share split, 500 YTL shares will be credited into Mr X's CDS
account on the night of 28 April 2011 being the Book Closing Date. Therefore, Mr X can sell the share
split shares of 500 on or after the Ex-Date ie from 26 April 2011 onwards."

Last Thursday when it held its EGM, YTL shares moved up 20 sen to RM7.45. On Friday which is a dull listless days on most markets, YTL bucked the trend to settle down at RM7.72 for another 27 sen gain. Now that the date of the ex-split is out, there is buying pressure to grab the mother share. It went up as high as RM7.99 in the first hour of trading this morning and settled at RM7.94 for another 22 sen gain.

From the buying pattern, it looks like either big funds are not here or they are taking small bites before the shares go ex. I believe the current 2.263 million shares traded today are mostly from small retail players except for a few chunks of shares at 300 lots and one 500  possibly coming from institutional investors.

The counter closed at RM7.90 for an 18 sen gain.

My Take:

I believe that YTL shares are under valued. I believe it is tightly held. I do not know who is throwing out the shares just before its ex date.

But I can foresee one scenario. It the shares go beyond the psychological RM8.00 mark, many local fund managers will move in. I believe long term investors such as PNB, Khazanah, EPF, SOSCO, and the Pension Funds are getting in now. If foreign funds should come in, do not be surprised to see YTL shares shooting past RM2.00 ex.

It will certainly pump up the fever and the pressure when feeding frenzy starts. By then it may just be too late to get premium profits.

You know what I mean?

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.

Different Perspectives

People can be mighty perceptive. Look at these two items. They have projected their own 'mind colour' to its meaning.

Biting Excitement at BJFoods!

It looks like this counter has suddenly catapulted out of its earlier doldrums.

From a high of 74.5 sen, it has backtracked and then somersaulted to new highs on heavy volumes of more than 30 to 60 million shares daily. No doubt day traders has helped. There seems to be genuine medium term investors buying into the counter. I suspect the main bulk could be Berjaya-led investing units chiefly BJCorp and Berjaya Sompo after relieving their stakes in BJRetail through market sales.

It has now touched 84 sen. Let us see what new price it will rest at before retracing or moving forward.

MRCB is currently tendering for RM2bil worth of projects including bidding for the Pudu Jail site
development.

A local business weekly has reported that Uda Holdings had shortlisted 10 companies including three
from overseas for the redevelopment of the former Pudu Jail site. The project's gross development value is
estimated at RM5bil.

MRCB's contracts include building projects and packages of the light rail transit extension for the greater
Klang Valley project and Penang Sentral. They have submitted their plans for hte latter to the state
government.

MRCB's current outstanding order book is RM1.6bil which will last the group over two to three years.

MRCB's projects in KL Sentral alone was worth RM4.2bil and it would be launching more projects next
month and in the fourth quarter.

For the year ending December 2011, MRCB aims to grow its pre-tax profit by 54.6% to RM150mil and
revenue to hit RM1.3bil.

For FY10, MRCB posted a pre-tax profit of RM97mil and revenue of RM1.06bil. Its net profit for the period stood at RM67.3mil.

“Our growth is mainly driven by the property and construction segment as well as our existing projects,”
said its CEO Razeek.

MRCB and Ekovest have recently formed a joint-venture company, KL Bund Sdn Bhd, in relation to the
River of Life project to rehabilitate the Klang and Gombak rivers.

Both companies received letters of intent for the river rehabilitation job from KL City Hall on Feb 22. The
value of the contract has not been revealed.

Razeek said it was still negotiating with the Government on the value.

At the AGM yesterday, The Chairman Azlan spoke on the Sungai Buloh land mixed development project which they intend to participate.

Currently, the land still belong to RRI. Of the 2,600 acres, RRI intends to keep 600 acres for its use. KTB
has also agreed to keep only 200 acres leaving 1,600 acres for use. The project which will be developed
in tendered out parcels will be open for bidding from potential developers. MRCB hopes to become the
project manager as well as bid for a few pieces for development.

To a question from the floor during the AGM, Chairman Azlan said priority for purchasing the houses to
be built by MRCB may be alloted to MRCB shareholders at current market prices.

MRCB's share prices should move up steadily over the medium term as more fund managers invest more into this semi-blue counter.

FELDA Global to IPO

Felda Global Ventures Holdings Sdn Bhd, the commercial arm of the Federal Land Development Authority, plans to list some of its businesses starting with its sugar operations in 2011.

The first, Malayan Sugar Manufacturing (MSM) will potentially raise RM1 billion  through its IPO. This could also make it one of the biggest IPOs for the year.

Apparently, Felda Global plans to list five companies and it is already in talks with a few investment banks namely CIMB and Maybank IBs.

The IPOs will help Felda Global to fund its expansion. 

Felda Holdings' pre-tax profits have more than doubled to RM804.3 million in 2009 from 2005 while revenue has jumped by almost two-thirds to RM11.8 billion in the same period. It is the  world's biggest plantation group by land, producing mainly palm oil, followed by rubber and cocoa. It is also the country's biggest palm oil refiner and controls some 70 per cent of Malaysia's sugar market.

Although Felda Global's oil palm operations cover some 850,000 hectares (ha) of land, it only manages them for the settlers and the Felda Authority.

It now wants to expand by buying land abroad in countries like Indonesia and probably as far as Africa, where oil palm trees originally came from.

Felda Global is believed to have a five-year plan and is even thinking about the next 50 years. Its most immediate concern is to improve productivity in its current operations and subsequently, raise funds for further expansion.

Felda Global bought MSM from Robert Kuok's PPB Group Bhd in 2009 for RM1.2 billion cash. It also bought half of Kilang Gula Felda Perlis Sdn Bhd for RM26 million and some 6,000ha of land in Chuping in Perlis for RM45 million.

For MSM, its IPO will help it grow its upstream business and eventually, its downstream business abroad. In Malaysia, the price of sugar is subsidised, which means it needs to look into other markets to grow.

Sugar is priced at RM2.40 per kg versus RM3.50 in Indonesia, RM3.80 in Singapore and RM2.80 in Thailand.

This is one good buy.