Not easy to use DCF for the acquisition I think, because that'll involve 2 currencies, and the cost of capital (equity still ok but the debt part is killing, due to multi currenties debt by YTL Power) to be use will vary depending on the debt (cost of debt & repayment scheme), though the cash flow can be working backward from the net profit (presumed no debt & other complication), agree warrant & impairment will not affect that but future expansion (2x cogens) plus other capital commitment will need to take into consideration also. But think should be doable anyway, gambate...

This post has been edited by htt: Dec 8 2008, 07:37 AM

I think I might misunderstood you, because I saw sky mention about DCF model and he is expecting that from you
But by accounting standard, SPV & Power Seraya will be deemed as fully owned subsidiary of YTL Power and Power Seraya's cash & debt will be reflected on YTL Power's book as well (same as YTL's asset & debt will report back on book of YTL Corp).

Actually for the company to go bust is very remote, but any new debt raised for purchase of new asset will be reflected in YTL Power's book, so all come back to square one. It's true if Power Seraya went bust, DBS might suffer most (but before that, DBS will seize the asset first ).

---

Added on December 8, 2008, 9:27 pmActually I think the DCF is better method to measure the transaction, but it will be good to read with EPS. But all these just measure the profitability of the deal, better picture will be rely on its synergy towards the group.

As bulk of the debt is convertible and long term, the debt/equity ratio is not that concerning, if they continue to have good cash management, I think they will just go on like this in foreseeable future (I don't mind so long the business is healthy and I got my dividend every year).

This post has been edited by htt: Dec 8 2008, 09:27 PM

I am an engineer too, but with some accounting background
The formula is generally correct.
But the complicated part is to determine the free cashflow generated by Power Seraya. Simplify method will be taken the profit after tax & interest add with depreciation. This is where the CFx come from.
The we need to determine the cost of capital for YTL Power, by the beta value, risk-free rate & market return rate.
Then using the equity beta into the WACC and find the discount rate.
Then load into the formula
But to work this out require a lot of works... I too busy to do that
Good night

I think WACC of 6% might be a bit low, because Ke is expected to be high at region of 8~9% (including the treasury share distribution).
But I am not concern about the DCF, because YTL Power is just one component of my portfolio and if I am going to do that for all my counters, I might die young And the model is going to be notorious to me (with all the convertible loan stock, floating loan stock subordinate bonds, see also faint)

But Pound & Aussie already drop so much and SGD seems to be more stable than RM, think the downside is low.

That's translation loss, but won't be realized until you paid the bill or sold the company etc. Even AA without much oversea subsi also kena teruk, because they loan in USD & EU, that one no cure one, only can x fingers RM can recover back But YTL Power opposite bet, the weaker the RM the better for them Someone win someone loss, we came t square one at the end, only banks laughing all the way... to the bank?

The net profit you estimate should be in the range.

For the first year
$2.25b loan
3m sibor at 1+%, I guess 2% interest rate for the loan should be ok.
Interest per year $45m.
$1.15b own money
12m FD in Malaysia around 3.8% p.a. Just take that as opportunity cost.
Opportunity cost per year $44m.
$218m net profit for FY07/08, FY end 31st March. Last 9m was good for Power Gen as electricity price hike (Singapore pact electricity price with fuel oil future, but generate power using gas, weird logic Anyway, electricity price going to be down in 4QFY08/09, as price going to erode for at least 25% from 3QFY08/09). Profit hike of 10% is prudent estimation. $240m.
Profit (not in cash term) = $240m-$45m-$44m = $151m. (Ignore interest on debt assumed, approx. $400m, guess that already included in the net profit figure)
Translate into RM = RM360m (FY08/09).

Coming year, major risk on oil price (as electricity price pact with that, but cost is not), over capacity (Singapore enter into recession, and Singapore Power don't absorb extra capacity like Tenaga did, the power generators compete against each other for the business), new co gen going online in near future (what if no demand? ) & Interest rate (we still have no idea how DBS charge the interest cost plus, sibor, libor? ).

Based on their ROE, estimate equity valued at $1.2b Means goodwill also might be quite high (no access to the book, we have no way to estimate the asset valuation, might be out by a lot for this). Maximum goodwill can go up to $2.2b (but unlikely). Impairment is possible (if the market worsen, cash generating ability will get impact, thus reduce the fair value of investment), but that won't bother me that much, as Singapore as a whole is very competitive economy, sooner or later they will get back to it.

And someone, please don't belittle others and insult them as you wish, that's no good. I don't know you and I don't know them either, but that's not fair for them, they just try to express their opinion (forum are supposed to be there for people to express their opinion, correct or not is another matter), the opinion might be right, might be wrong, but we learn from our own mistake. You just can't get yourself higher by stamping others.

Merry Christmas to all. And PEACE...

I think you have to believe me on that, because I am paying them every month. Every 3 month there will be an advertisement on the electricity pricing and clearly stating the relation between fuel oil future and coming 3 month electricity pricing. And we see a lot of public opinion questioning fairness on the system where most of the power generate from natural gas but price determine by fuel oil future average, government's explanation is: they have to find a way to measure the price (but natural gas on long term contract, thus not moving much, this part is hidden). Last 3m had been extremely good for power gen as rate charged up with +-30%, creating public uproar and coming 3m we will similar decrease, or even bigger drop thereafter.

Overcapacity of power supply is Singapore going into recession (as now, technically), businesses closed and not much demand on electricity (ground sentiment in Singapore is not really good, everyone just hang on to their job at the moment, I don't think jobless guy can afford turn on air condition at home everyday, and expats are leaving). Singapore's power system is: we pay Singapore Power and Singapore Power pay the power gens, if no demand, the purchase from power gens can be reduce, unlike Tenaga paying fixed amount to IPP.

As per the their statement, 800MW or something like that, that's new capacity and the thing on progress already.

Yes, for loan in such quantum they need to be very careful, but Singapore's interest had been very low for a very long period, for the moment, we don't see it going up (to be inline with others), so hedge won't cost that much too.

Impairment for extremely bad economy, Singapore economy is very open, thus expose to outside very much, any stimulus package will go out from the country the next day, PM Lee said, because we buy everything from other countries...

I think that will be a lot of works to be done for that extent of analysis, don't think I will ever have that kind of time to do that.

They will announce in www.klse.com. So far never see.

---

Added on January 10, 2009, 11:29 amThey didn't mention how long is the loan, just some wild guess from analyst only.

This post has been edited by htt: Jan 10 2009, 11:29 AM

Power Seraya.

I think not so right, interest cannot be accrue to the end of the loan period, that's against the 'matching concept' in accounting framework. Just my 2 cents.

Cannot lah, if I am the auditor of the company I will screw it kao kao... too bad I am not... haha...

YTL Corp hold all of them I think (the 7.1 counter). If you want proxy on all the companies, then YTLCORP should be right for you. If you interested in any particular business, then go directly to that.
YTLPOWER - utilities.
LAND - real estate dev.
E - Electronics Solution?
CMT - cement.

WA & WB are warrant, diff. strike price & expire date.

What's the reward you offer for anyone who come out with a correct answer?

If you take the profit (if gain),
while the other party take blame (if loss).
You think what a sensible people will do (for free)?

IPP sell to TNB fixed price mah...

This is the last buy back, after that no seen yet...
Date of buy back:13/10/2008
Description of shares purchased:Ordinary shares of RM0.50 each
Total number of shares purchased (units):50,000
Minimum price paid for each share purchased (RM):1.740
Maximum price paid for each share purchased (RM):1.750
Total consideration paid (RM):87,837.36
Number of shares purchased retained in treasury (units):50,000
Number of shares purchased which are proposed to be cancelled (units):0
Cumulative net outstanding treasury shares as at to-date (units):54,884,645

Bill Gates retired, Steve Jobs sick.

Aiya, after 0.75% reduction on OPR, RM might follow the trend of Sterling also... why worry so much?