Last reported earnings for Power Seraya was SGD218mill in net profits. That is equivalent to more than RM500mil or 50% of YTLPOWER's last year net profits.

I say it's a good deal if they get it around SGD3.5 - 4 billion. Which is about 16 - 18 times net profits.

Ugghh the dreaded windfall tax should have never crop up in the first place. Bad example of fiscal policy by the government.

Sterling issue has been debated and discussed. A lot of people are worried about this as it can ultimately affect the dividends at the end of the year. But I think it is not as bad and still believe it is a temporary thing because I believe the RM has more downside risks compared to the GBP.

Whether it is Rm1.50 or RM1.60, its just a point of reference for entry. As the counter is ultimately a diidend counter, what price you enter should not be a deterence if the difference is small. It's not like the price is between Rm2.60 and Rm1.60.

A lot of times people tend to worry about small issue, they miss the boat or in this case the whole point of owning the counter in the first place. Which is constant dividend.

Right now the share is Rm1.70, which is already attractive and can hold. RM1.60 is even better and if the profit margins are really affected, Rm1.50 would be ideal. But that's not to say it can't go below Rm1.40.

Aiyah please don't call me 'Sifu'. Me also learning like everyone, let's reserve the 'sifu' tag for people who actually are pro and experienced, if not later the term no meaning if everyone is called 'sifu'.

Normally people hold WB for the leveraged returns when the stock experience some upside. Note that it can go down as well. But either way, for lesser amount of capital, the potential to earn more is there.

It's WB doesn't earn any dividend and that is something you need to calculate yourself.


230lots WB = potential 230 lots worth of dividends but need to add lot of capital to realise that, about RM27k exercise price.

But 230lots WB also = potential 230 lots of capital appreciation at no additional costs, if the mother share price appreciate, ala successful acquisition.


For me, WB is 1/3 of the mother share. Just like the distribution ratio. So if I buy more mother share, I buy WBs 1/3 ratio.

But if you feel the counter will rise significantly within 1 year, then best to sell all mother share and buy all WB. Because 1 sold mother share can buy 3 WBs and if mother share prices shoot up, WB shoot up same amount but you will earn 3x more if holding WBs.

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Added on November 15, 2008, 10:57 pmLatest quarterly report shows that EPS for previous year was 19.99 sens. The diluted EPS after considering all WA and WB warrant conversion and Zero Couponconversions plus ESOS as well is 15.31 sens.



This post has been edited by skiddtrader: Nov 15 2008, 10:57 PM

Yeah that is possible as well if the counter stays stagnant.

Just a reminder, the expected latest quarterly report is due end of next week. This report should show some sign whether the GBP effect is as we feared. 1st quarter time-line is from 1st July to 30th Sept 2008.

It's about the same time the GBP started falling significantly against the RM but a more clearer view should be the 2nd quarter ending Dec 2008. If there is a dent in the profit margin, with an explanation, then that would be worrying. But if all still looks good, then less worrying.

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Added on November 16, 2008, 11:07 amIf the acquisition of Power Seraya really materializes, the EPS of YTLPOWER would increase by at least 50% because Power Seraya last net profit was more than RM500 mil. That itself would mean the share would appreciate by at least 30% if the deal is fair enough.

If the mother share increases by 30% following the increase of EPS from RM1.70 to RM2.21, the WB price would double from the current RM0.50 to RM1+. That's why I said if anyone is confident of an acquisition, they should buy all WB and wait for the jump.

Even if the acquisition fail to materialize, the WB would stay the same in the short term.

This post has been edited by skiddtrader: Nov 16 2008, 11:09 AM

All are in the latest quarterly reports. The diluted EPS as well is calculated for you. How many shares, ESOS convertible bonds, are all stated. It's all near the end of the report. Expected NTA after all those conversions are also stated.

PER at the current moment if you take the diluted is higher of course.

But the new WB warrants lasts for 10 years. It would be very conservative to take that into account when calculating PER. Of course this all depend on your own margin of safety so it's all personal calculation.

For me, the current PER if using the 19.99 sens EPS is RM1.70/0.1999 = 8.5x

Slashing 50% of potential dilution of EPS within the year, the EPS still will be about 17 sens, which nicely sits the PER at 10x.

Of course, if the EPS is affected by the GBP effect, then it's a whole different ballgame.

Altogether expected if all conversions of warrants, zero coupon bonds and ESOS, YTLPOWER will raise another RM3 bil or so. But unfortunately, cash in hand for the most part only earns interest from banks. So the contribution to EPS is not as significant. But yes, NTA will increase slightly if all conversions are done.

I can see that darkknight is more concern about the opportunity costs of holding warrant and missing out on the dividend 'profits'. Furthermore, holding on to mother share even if the price drops it still brings in dividends and potential share dividends as well.

Where as holding warrant gives you a chance of earning a leveraged profit on the upside, the risks of being stagnant or worse falling (also leveraged) would make it seem ill-advised for long term. But when the downside risks are minimized or already taken into account and recovery is expected, the WB would be a more 'profitable' choice given the amount of capital appreciation will surpassed the dividends.

So darkknight would still be right to say he will only buy more warrants if the prices fall more, but he is uncomfortable holding too much WBs because he is expecting it to weaken further. Thus he rather convert the WBs now, get the dividend for Dec, then buy more WBs on drops.

Calmwater is not wrong as well, as he is trying to maximise his investments in a stable company. Holding on the leveraged instruments is always risky, but since the company is stable and the downside risks are already minimised, he feels holding warrants for capital appreciation due to possible acquisitions is better. This is to prevent missing the boat. What he will lose if nothing happens is the dividends, and worse scenario the share prices drop some more and the WB becomes even lesser value. But since WBs lasts for 10 years, the natural way upwards of the counter will get him back his investment in time. But his gains would be extraordinary if the share prices appreciate significantly.

Wow good info, so that means you won't be converting then?

From what I can see from YTLPOWER has at least 2 more years to acquire something, if not their bonds will be expiring and they need to re-pay back the bonds. By using the cash for a profitable acquisition, they can generate more funds to service their loans as well as secure new funding because their revenue have increased. So I really believe within 2 years they will have to acquire something.

To be honest, I'm more of a balance type. I will hold some mothershare for dividends as well as warrants for potential capital appreciation. Since the share is always rising due to appreciating EPS, the likeliness of the warrant depreciating too much is in my opinion minimised.

I just noticed something. There is no share buybacks at all in November.

Nowadays The Star business every week talk about YTL this and that. Seems like YTL advertising with them haha.

Edit: Found the more detail article here. Edge Daily

This post has been edited by skiddtrader: Nov 20 2008, 03:04 PM

YTLPOWER announced an Interim Dividend of 6% gross less Malaysian Income Tax and 3% single tier in respect of the financial year ending 30 June 2009.

Ex-date 31/12/2008
Pay date 21/01/2009

Funny announce so early eh, because that means with this announcement there is 2 dividends announced already which is not yet paid.
Previous dividend announcement was for final dividend which;

Ex-date is 05/12/2008 and
Payment 26/12/2008


No wonder a few days back YTLPOWER suddenly got some price jump and volume.


:Edit: Nevermind, YTLPOWER just ported their quarterly report. Waste my time writing only haha

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Added on November 20, 2008, 6:53 pmNet profit for YTLPOWER is RM100mil lower than last quarter.

There is also some sort of profit warning in the report regarding the GBP issue and also due to the 1 time windfall tax. That's the explanation for the RM100 mil lesser net profit.





This post has been edited by skiddtrader: Nov 20 2008, 06:53 PM

I disagree that ESOS causes as much dilution. It is an insignificant amount compared to the outstanding shares at the moment.

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Added on November 21, 2008, 1:05 amAccording to the quarterly report, 260 million WB was converted to mother share last quarter. That is about 10% warrants issued, so about 3% dilution last quarter.



More importantly though I wanted to point out that for dividend players. 2 dividends with ex-dates in December!! Final dividend for 2008 is 7.5% tax free ex-date 5th Dec and latest interim dividend 6% subject to tax + 3% single tier dividend ex-date 31st Dec.

Those 2 dividends equals roughly 8.25 sens per share if you claim back the tax. That's about 4.8% DY at current RM1.72 price within 2 months!!





This post has been edited by skiddtrader: Nov 21 2008, 01:10 AM

Their dividends always refer to their par value, so should be 6% subject to tax on RM0.50 and another 3% on their par value.

Assuming you don't claim back your tax;

6 - 25% personal tax = 4.5% dividend

4.5% * RM0.50 = RM0.0225


While the other 3% i assume is already taxed at corporate level;

3% * RM0.50 = RM0.015

So total dividend if you don't claim back is;

RM0.0225 + RM0.015 = RM0.0375

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Added on November 21, 2008, 9:07 amYeah I have that suspicion as well. Something doesn't add up in the report.

I've done some reading and comparisons, and I found that for the previous quarter, the GBP effect is actually quite small and normal.

The 2nd quarter should be where we are worried about.


Conclusion from reading the report:

YTLPOWER's power generation profits almost completely disappeared. I assume this has gone to the 1 time payment of Windfall Tax. I estimated after comparing previous quarters results, that YTLPOWER paid about RM84 mil in taxes. This is my estimation as there is no mention how much they actually paid.


Wessex Water's business fell by 5% or so compared to previous quarter, but it is in line with 3Q 2008 numbers, so the GBP effect is not really visible.

This post has been edited by skiddtrader: Nov 21 2008, 09:15 AM

In terms of conversion rates, I used the last quarterly report day as a reference point. I checked back most of the previous reports do the same, but this report did not state what figures they are using.

If the acquisition of Power Seraya actually go through by end of this year, the WB will shoot up. But if there is no confident of that, then might as well sell the WB now, wait for the dividend then buy back the WB. But if you don't hold as much, might as well just hold it if the transaction fee is a lot.


Regarding Power Seraya chances, it's definitely better than the Senoko Power sale because that one had 6 entities shortlisted. While this one only has 3 entities shortlisted. So in terms of chances, they have a 33% chance compared to previous 16% chance.

YTLPOWER has experience in running 2 out 3 business Power Seraya has, which is water treatment, power generation and oil trading. Although the water business is a bit different as Power Seraya is running a desalination plant.



This post has been edited by skiddtrader: Nov 22 2008, 12:18 AM