YTL Power
Shortlisted to buy Senoko (Buy; RM1.85; YTLP MK; TP
RM2.40)
Business Times reported that Singapore government-owned
investment firm, Temasek Holdings Ltd has shorted five
companies from preliminary bidding for its sale of Senoko
Power Ltd, according to banking sources. France’s GDF
Suez, Japan’s Marubeni Corp, India’s Tata Power, YTLP,
OneEnergy – tie up between CLP of Hong Kong and Japan’s
Mitsubishi, are the shortlisted bidders. Market participants
have estimated that sale of Senoko could fetch about
US$3b with debt financing of up to US$2b. Senoko has an
electricity generation capacity of 3,300MW and supply
about 30% of Singapore’s electricity.
We view the development positively for YTLP given Senoko’s
stable power demand growth and Singapore’s low regulatory
risk for concession assets. For FY3/08, Senoko reported
revenue of S$2.5b and EBITDA of S$245m. We understand
that the estimated IRR for Senoko is between 8-10%, and the
final bid will be submitted by end September. YTLP is likely to
fund the equity portion with its strong gross cash of RM7.6b.
We continue to favour YTLP for its potential acquisition
growth and attractive 10% net yield based on sustainable net
cash dividend yield of 6%, and 1-for-25 share distribution that
provides 4% net yield. Maintain Buy with SOP-derived target
price of RM2.40 per share.