YTL Corp has been off most investors’ radar screen for some time now as earnings and dividend prospects appear more interesting for its flagship subsidiary YTL Power. YTL Corp’s valuations in terms of P/E and growth have also not been exciting. Although its FY6/10 P/E of 15x is below the market’s 18x, its profit growth over the past few years have been single-digit. However, YTL Corp may become more interesting from the dividend perspective as management’s aim is for almost all its subsidiaries to channel cash to the holding company through dividends, possibly transforming YTL Corp into a high yielding stock.
Should the group manage to secure the HSR (high-speed rail) project, earnings growth would accelerate, which would help re-rate the stock. As the HSR would lead to significant spillover benefits for Greater Kuala Lumpur by bringing in Singaporeans who would spend money in the city and possibly buy property, the YTL Group stands to benefit handsomely too as it has shopping malls along Jalan Bukit Bintang held under Starhill Global REIT, hotels throughout the country via Starhill REIT and upscale properties for sale through YTL Land. YTL Corp’s Express Rail Link to the airport should also benefit from the HSR project as the latter is likely to run on its tracks.
For exposure to the HSR project, YTL Corp would be a direct play while YTL Cement would be a beneficiary from increased construction activity not only from the HSR but from the MRT and other projects. For exposure to WiMAX, YTL Power would be the direct play while YTL e-Solutions would be the lower-risk alternative but with leveraged upside.
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