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YTL Power a Malaysia Globetrotter

Kuala Lumpur, 9 September 2006

YTL Power International Berhad has been recognised as a Malaysia Globetrotter by JPMorgan. JPMorgan will identify and consistently track Malaysia Globetrotters companies that have the following criteria: 1) At least 30% sourced overseas earnings contribution; 2) strong management track record of executing overseas; 3) positive earnings momentum or a sustainable competitive edge; and 4) attractive valuations.

Looking at YTL Power (YTLP), JPMorgan noted that 75% of YTLP's net profit comes from outside of Malaysia due to a shrewd maximization of capital and a keen sense of M&A.

The M&A success of Britain's Wessex Water in asset and currency appreciation has been repeated with the acquisition of the ElectraNet transmission lines in Australia and the 35% stake in PT Jawa, the largest coal-fired IPP in Indonesia.

JP Morgan underlined the compelling point about YTLP's M&A philosophy is that it is not asset players but business builders whose new concessions acquired would be enhanced to drive group earnings growth and add value for the long-term. The most recent illustration of this is the 18% net profit growth registered in YTLP's just released FY06 results.

According to JPMorgan, Malaysian companies are finding it increasingly difficult to grow within the domestic market. The report stated JPMorgan's belief that companies that have restructured and adapted to this reality by seeking new growth opportunities abroad are likely to deliver stronger earnings momentum in the medium term.

"As a consequence, we are likely to see listed Malaysian companies with a significant and steady stream of overseas earnings outperform the cluster of domestic-market reliant companies in terms of earnings growth and, eventually, share price performance," the report added.

Extracts from the report by JPMorgan:

Malaysia Globetrotters
Masters of their own destiny

Asia Pacific Equity Research,?5 September 2006

YTL Power
Overweight
Current Price:?RM1.92
Price Target:?RM2.38

Why is this company a Globetrotter?
75% of YTLP's net profit comes from outside of Malaysia due to a shrewd maximization of capital and a keen sense of M&A where the capital raised in the listing of YTLP was used to exploit the collapse of Enron, taking over its prized UK concession, Wessex Water. Paying a 15% discount to its regulated asset base (RAB), the asset is now worth 1.2x its RAB. Taking into account the appreciation of the pound from M$5-7 and the growth of RAB, the investment in Wessex has yielded more than a 70% return since its acquisition in 2002. This M&A success in asset and currency appreciation was repeated, albeit to a smaller scale, with the acquisition of the ElectraNet transmission lines in Australia and the 35% stake in PT Jawa, the largest coal-fired IPP in Indonesia.

The compelling point about YTLP's M&A philosophy is that it is not asset players but business builders whose new concessions acquired would be enhanced to drive group earnings growth and add value for the long-term. The most recent illustration of this is the 18% net profit growth registered in YTLP's just released FY06 results.

With M$4.7 billion of unencumbered cash on its balance sheet and M$300-500 million in free cash flow a year, YTLP has a sufficiently large amount of capacity to maintain its global M&A ambitions as well reward shareholders with a dividend payout policy of at least 50%, thus offering a 5% yield.

Key share price catalysts
Another M&A event would very likely be well received by investors given management's track record of creating value. Meanwhile four years of intimate knowledge of the workings of a well-regulated and efficient UK water industry would position the company well for the eventual full-scale privatisation of state owned water resources. Given the parent company's construction expertise, we do no rule out YTLP's participation in the much-needed M$10bn Pahang-Selangor water transfer and treatment project

Valuation, price target and risks
Our August-07 price target of M$2.38 is based on our DCF of the Malaysian IPPs, the RAB valuation of the Wessex Water concession and the book value of the PT Jawa and ElectraNet investments. We believe the risk to our price target is the ongoing power purchase agreement review in the Malaysian power sector, which may end up being NPV negative.

By?Lucius Chong





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