YTL Looks for Purchases With $3 Billion 'War Chest'


Bloomberg, November 19, 2008

By Angus Whitley and Bernard Lo

Nov. 19 (Bloomberg) -- YTL Corp., the Malaysian builder with water, property and power businesses from Asia to Europe, said it has a "war chest'' of 12 billion ringgit ($3 billion) and is hunting for acquisitions as asset values decline.

"We have an army of people combing through deals,'' Managing Director Francis Yeoh said in an interview with Bloomberg Television today. "Valuations are going down by the day. I've been waiting for this moment for a long time.''

The global recession has sent every major benchmark stock index worldwide tumbling at least 30 percent this year after the collapse of banks and insurers from the U.S. to Japan. YTL, also Malaysia's largest builder, could borrow six or seven times more than its cash for larger deals, Yeoh said, suggesting valuations may be near their bottom.
 
"It's the best time to buy assets which are at distressed levels,'' said Jason Chong, who helps oversee $1.6 billion of securities, including YTL shares, as chief investment officer at UOB- OSK Asset Management in Kuala Lumpur. "In times like this, cash-rich companies like YTL can afford to cherry-pick.''

While the company will maintain a "steady dividend flow,'' YTL investors shouldn't be surprised if dividend growth eases to allow the company to make acquisitions, Yeoh said.

YTL, the owner of resorts across Malaysia and the Ritz-Carlton and JW Marriott hotels in Kuala Lumpur, is assessing businesses in the property, power-generation and water industries, Yeoh said. He wouldn't name specific targets.

Target Singapore

The builder is particularly looking for deals in Singapore, where rents are falling, and in the U.K. and Australia, where the domestic currencies have weakened. The Malaysian ringgit is up 17 percent against the pound and 32 percent versus the Australian dollar in the past six months.

"If you buy a pound asset today, you can't go that wrong,'' Yeoh said. "Every time there is a currency implosion, you are at an advantage. A lot of deals are beginning to be quite salivating.''

In south Australia, where YTL owns 33.5 percent of ElectraNet Pty, a power generator with a 200-year license, YTL is looking at power and transport infrastructure assets to buy, Yeoh said. Sellers needing cash have approached YTL, he said.

YTL in October agreed to pay S$285 million ($186 million) for control of Macquarie Prime Real Estate Investment Trust, owner of stakes in two Singapore shopping malls. YTL last year bought an apartment building in Singapore for a then-record S$435 million.

YTL favors assets that already generate cash and are regulated, such as Britain's Wessex Water, rather than those needing investment, he said.

'Cherry Picker'

"We will have a lot of income-generating assets that will be bought at very reasonable prices,'' he said. "Over the next two years, there will be a lot of cherries to pick. I'm interested in buying assets and keeping them for a long, long time.''

YTL today fell as much as 1.6 percent to 6.35 ringgit and traded at 6.4 ringgit at 3:25 p.m. on the Malaysian stock exchange. That gives the company a value of 10.5 billion ringgit.

Profit at YTL in the year ended June 2008 rose 10 percent to 769.8 million ringgit from a year earlier, helped by higher earnings at the utility and cement divisions. Revenue climbed 9 percent to 6.55 billion ringgit.


--- With reporting by Chan Tien Hin in Kuala Lumpur and Momoe Ikeda-Chelminska in Tokyo. Editors: Teo Chian Wei, Indranil Ghosh




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