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Thursday, November 20, 2008

YTL Corp hunts for acquisitions

KUALA LUMPUR: YTL Corp Bhd says it has a “war chest” of RM12bil and is hunting for acquisitions as asset values decline.

“We have an army of people combing through deals,” managing director Tan Sri Francis Yeoh said in an interview with Bloomberg Television yesterday. “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% this year after the collapse of banks and insurers from the US to Japan. YTL could borrow six or seven times more than its cash for larger deals, Yeoh said, suggesting valuations might be near their bottom.

“It’s the best time to buy assets which are at distressed levels,” said Jason Chong, who helps oversee US$1.6bil of securities, including YTL shares, as chief investment officer at UOB-OSK Asset Management.

“In times like this, cash-rich companies like YTL can afford to cherry-pick.” he said.

While the company would maintain a “steady dividend flow,” YTL investors shouldn’t be surprised if dividend growth eased 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, was assessing businesses in the property, power-generation and water industries, Yeoh said. He wouldn’t name specific targets.

It is particularly looking for deals in Singapore, where rents are falling, and in Britain and Australia, where the domestic currencies have weakened. The ringgit is up 17% against the pound sterling and 32% 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% of ElectraNet Pty, a power generator with a 200-year licence, YTL was looking at power and transport infrastructure assets to buy, Yeoh said, adding that sellers needing cash had approached YTL.

YTL in October agreed to pay S$285mil 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$435mil.

YTL favoured assets that already generated cash and were regulated, such as Britain’s Wessex Water, rather than those needing investment, he said.

By Bloomberg

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