KUALA LUMPUR: As the share price of YTL Power International Bhd hovers near a nine-year low, the Employees Provident Fund (EPF) is paring down its stake while the company announces a buy-back programme.
Recent Bursa Malaysia filings show that the EPF has cut down its holdings in YTL Power to 7.93% from 9.37% between November 2012 and yesterday. Approximately 117 million shares were disposed of by the retirement fund.
The EPF will cease to become a substantial shareholder if it chooses to sell an additional 214 million shares, which would bring its stake to below 5%.
“Perhaps the two parties have a difference in opinion as to how the company should be run,” said an analyst.
“Given YTL’s healthy cash position, they can always take the privatisation route. At the moment, it will take a major catalyst for YTL Power’s share price to recover from its current level,” he added.
The conglomerate was reported to have a cash pile of RM14 billion and is looking to flex its financial muscle with new investment opportunities.
YTL group chief Tan Sri Francis Yeoh had recently stated an interest to own more of YTL subsidiaries, although he dismissed outright plans for privatisation.
“As a shareholder in my subsidiaries, of course I want to own more of them. Their cash flow and profitability are tremendous,” he told reporters at the recently concluded Invest Malaysia 2013 capital market conference.
The Yeoh family has a controlling interest in YTL and its subsidiaries through Yeoh Tiong Lay & Sons Holdings Sdn Bhd, its private investment vehicle.
YTL Power initiated a share buy-back programme late last year of up to 10% of its issued and paid-up capital.
The company has repurchased close to 161 million shares since February. To date, it has accumulated a total of 217.58 million shares in treasury stock.
One justification for the repurchase was to stabilise the demand and supply of its shares in the open market, thereby supporting its fundamental value.
The management may also choose to redistribute the shares as dividends to reward existing shareholders.
YTL Power’s share price has declined by close to 10% since early 2013, hitting a nine-year low of RM1.41 on March 22.
The diversified group is involved in five distinct businesses which are power generation, utilities, water and sewerage, mobile broadband network and investment holdings.
Its year-to-date earnings have largely underperformed expectations, according to observers. YTL Power posted RM765.01 million in net profit for the first nine months of financial year 2013, which made up only 65% of research houses’ earnings consensus.
No dividend was declared during the latest quarter, making it the second consecutive quarter without a dividend payment by YTL Power.
As a result of the stock’s underperformance, YTL Power was recently removed as a component stock from the FTSE Bursa Malaysia Kuala Lumpur Composite Index.
The counter closed at RM1.52 yesterday, with 6.01 million shares done.
Written by Afiq Isa of theedgemalaysia.com
This article first appeared in The Edge Financial Daily, on JUNE 19, 2013.
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