Jun 28, 2012

YTL Corporation - Target Price RM2.44

YTLPOWR (stock code 6742)  A regional powerhouse (BUY, Target Price : RM2.44)

After a lackluster performance in CY11, YTL Corporation’s stock hit an inflexion point at the start of this year, fuelled by the positive response from investors towards the recent privatisation of its subsidiary  YTL Cement Bhd, which led to improved free float of YTL Corp shares and an increase in the stock’s weightage on the MSCI Asia ex-Japan Index to 2.2%.

From a recent meeting with the management, we gather that it is in YTL Corp’s long-term agenda to progressively increase its stake in its key operating subsidiaries such as YTL Power International Bhd and possibly take some of them private. The key rationale behind this is to step up YTL Corp’s annual dividend inflow from its subsidiaries which would allow more room for the company to give more generous dividend payouts. Initiate coverage on YTL Corp with a BUY call and potential sum-of-parts target price of RM2.44.