Strategic Financial Managament FIN921

SABAH CAMPUS

STRATEGIC FINANCIAL MANAGEMENT

(FIN 921)

TERM PAPER

THEORY & CONCEPT DIVIDEND POLICY :

EVIDENCE FROM YTL CORPORATION BERHAD

GROUP MEMBERS : RAMDAN BIN ALI (2012819804)

NOORAIN IMBUG (2012484088)
ZARINAH BINTI ABDULLAH (2012409134)

LECTURER : PROF. DR. FR. ROSALAN ALI

Doctorate of Business Administration (Sabah)

16 JUNE 2013

1|Page
 Strategic Financial Managament FIN921

Table of Content Pages

1.0 Introduction 3
2.0 Dividnd Policy 4
3.0 Types of Dividend 7
4.0 Why Dividend Policy Is Important 7
5.0 Previous Studies About Dividend Policy 8
6.0 Implication Dividend Policy To Company & Investors 10
7.0 DIVIDEND POLICY : EVIDENT FROM YTL CORP BERHAD 12
7.1 YTL Corp Berhad Overview 13
7.2 YTL Corp Berhad Business Overview
7.3 YTL Corp Berhad 5 Years Financial Analysis 17
7.4 YTL Snapshot 23
8.0 Summary 23
8.1 Prospect Investment 2013 23
8.2 Revenue Since 2008-2012 24
8.3 Dividend Payment Historical Data Since 2008-2013 25
8.4 YTL Stock Market Movement Since 2008-2013 26
9.0 Recommendation For Investors 27
10.0 Conclusion 28

References

2|Page
 Strategic Financial Managament FIN921

THEORY & CONCEPT DIVIDEND POLICY :

EVIDENCE FROM YTL CORPORATION BERHAD
1.0 Introduction

Dividends are an issue of concern to investors since they provide a source of income and
more importantly they give the investors an insight about the company’s performance. Setting
a proper dividend policy is a crucial task for the managers since it has a major touch on the
company’s share price and it also can influence the asset pricing, capital structure, mergers
and acquisitions, and capital budgeting (Allen and Michaely, 1994).

Dividend policy is a complicated issue which has always been debatable. Not only the amount
of money involved and the repetitive nature of dividend payout makes this topic important,
payout policy has a close relation with most of the firm’s investment and other financial
policies (Allen and Michaely 1994). However many researches conducted show that dividend
payment is a signal of the performance of firms. In order to pay out dividends, firms have to
incur a high transaction cost and therefore for financially strong firms, incurring the cost
would not be a problem as compared to firms which are financially weak.

The dividend paid to shareholders can be an indicator to the wealth generated by the
company. This consisten with Bhatacharya (1979) mentioned that only those firms
considered as 'good quality' and those expecting high cash flow will pay dividends. Futhermore,
dividend it’s a clear indication and easy to obtain . Dividend is commonly known as a kind of
reward to the company's shareholders for their investment.

Therefore, it’s depends on the criteria determined by the direction of the company and
sometimes be more influenced by short-term interests for what it is right for the company. By
way of example, it is seldom that a company is in losses to its shareholders a dividend
payment from the reserves to cover the existing problems. According to worldwide Anil and
Kapoor (2008) many researchers in their literature provided several rationales for dividend
policy without any unanimity yet in the same time, dividend payment is considered as one of
the most commonly observed phenomenon in corporations. When profitable company
generates net earnings for a given period, its earnings is either reinvested or distributed as a
dividend to the shareholders

3|Page
 Strategic Financial Managament FIN921

2.0 Dividend Policy

The dividend policy theories refer to explicit or implicit decision of the Board regarding the
amount of residual earning whether past or present that should be distributed to the
shareholder of a corporation. . Generally it’s basis on two basic objectives : to maximize
the benefit of the owners of the company and provide sufficient funding.

It is characterized by its dividend payout ration, which is the percentage of net earnings paid
out to shareholders. Before a dividend policy is established, there are few factors that the
management will consider in order to determine the optimum payout ratio. Factos that will
influence the optimum payout ratio.

Chart 1 : Optimum Payout Ratio

Basic expectations mean that some investor likely to prefer current dividens, which are less
risky than future gains while others are willing to take risk of future capital gains with the

4|Page
 Strategic Financial Managament FIN921

expectation of higher rate of return in the future. While investment opportunities means if the
company is at the growth stage with a good investment opportunities , the management may
want to retain earnings to fund its investment. For target capital structure, mostly companies
have targeted capital structure, which is the ratio of debt versus equity financing. Lets say if
the company is already high in debt, the management may decide to retain earnings to adjust
the ration back to its optimum level. Availability and cost of external capital if the cost of
external financing is higher that internal funding, this will also affect the cash dividend
payouts.

2.1 All profits are distributed. The benefit-sharing ratio is 100% based on the idea that
all you want to share with the shareholders are dividends. In the same time managers, who
need their own funding, should convince shareholders that the investment projects will able to
increases their wealth, thus it’s advisable to encourage them to invest in the company.
However companies often do not follow this distribution policy.

2.2 Not distributed dividends. It is the opposite with previous policy and based on that
given the tax and transaction costs exist. Despite the argument, very few companies follow
this policy of no dividends.

Chart 2 : Not Distributed Dividends

2.3 Both fixed on profits. Of total annual earnings the company distributes a fixed
percentage. This policy, more logical than the previous ones, is unusual in business, because

5|Page
 Strategic Financial Managament FIN921

the benefits are a random variable, so will the dividends, which often adversely affect the
stock price.

2.4 Dividend as waste. The residual theory of dividends suggests that companies should
undertake all investments that increase the wealth of shareholders for instance dividend with a
positive NPV. Therefore, any excess cash should be returned to shareholders via dividends or
repurchase its shares. The problem underlying this theory is that if the profits or investment
opportunities vary from year to year it will imply a variation of the dividends, which would
increase risk . As a result this policy will not strictly followed by the companies.

2.5 Stable dividend policy . Formerly, many companies paid a constant dividend if it
seemed clear that future profits were sufficient to keep it that way. This policy was an attempt
to avoid having to reduce dividends. Because inflation has pushed up the value of benefits has
emerged called "policy of steady growth rate, in which the policy framework marks a growth
rate of profits and tries to match it. It is played with the reserves to offset the bad years
dividend (distributed under the same) or to accumulate excess undistributed profits in the
good. This type of policy tends to provide stability in the price, eventhough if it’s upward or
downward movement of the benefits appear to be durable, the company will reconsider this
policy.

Extraordinary dividends orperiodic release of bonus shares, are adjustment mechanisms to

ease the stiffness of a constant dividend policy. Dividends are set in line with the expected
cash flows and are based on long-term benefits and dividends from the previous period. While
in the short term, dividends tend to receive a smoothing in order to avoid frequent changes.
This can be reconciled with the notion of the information contained in dividends that
managers seem to use as a signal indicative of long-term yields. Most of the companies follow
a stable policy in the dividend distribution policy.

2.6 Dividend arbitrary or erratic. Each year a dividend that does not follow any of the
above said ruled policies. Followed by companies that are adrift in the market and have failed
to stabilize in the same.

3.0 Types of Dividend

Dividend or distribution of earnings or capital normally is made in two ways:

6|Page
 Strategic Financial Managament FIN921

3.1 Cash dividend.

Regular cash dividends, which are paid out of the firms' cash and are paid a few times in a
year depending on the policy of the firms. Mostly decided by the board. Managers often make
quarterly or semiannual meetings to assess the previous financial performance of the
company, as well as to gain an insight how will will the dividends to be paid. . This type of
dividend payment will reduce the cash and retained earning of the firms if distribution is made
out of the retained earnings. However if distribution or dividend is paid out of capital, the
retained earnings will not be reduced; it will only reduce the paid-up capital of the firms.

3.2 Stock Dividend

A stock dividend is the payment of dividends in shares to existing owners. Companies often
use this type of dividend as a form of replacement or addition of cash dividends. No cash is
involved in this type of dividend payment. It will only increase the number of stock or shares
outstanding and reduce the value of the shares.

Chart 3 : Types of Dividend

4.0 Why is Dividend Decision Important?

Dividend Decision refers to the policy that the management formulates in regard to earnings
for distribution as dividends among shareholders. Dividend decision determines the division
of earnings between payments to shareholders and retained earnings. Dividend decision, in
corporate finance, is a decision made by the directors of a company about the amount and
timing of any cash payments made to the company's stockholders. The Dividend decision is
an important part of the present day corporate world. The Dividend decision is an important
one for the firm as it may influence its capital structure and stock price. In addition, the

7|Page
 Strategic Financial Managament FIN921

Dividend decision may determine the amount of taxation that stockholders pay. There are
certain issues that are taken into account by the directors while making the dividend decision :

4.1 Free Cash Flow Theory : The free cash flow theory is one of the prime factors of
consideration when a dividend decision is taken. As per this theory the companies provide the
shareholders with the money that is left after investing in all the projects that have a positive
net present value.
4.2 Signaling of Information : It has been observed that the increase of the worth of
stocks in the share market is directly proportional to the dividend information that is available
in the market about the company. Whenever a company announces that it would provide more
dividends to its shareholders, the price of the shares increases.
4.3 Clients of Dividends : While taking dividend decisions the directors have to be aware
of the needs of the various types of shareholders as a particular type of distribution of shares
may not be suitable for a certain group of shareholders.

5.0 Previous Studies About Dividend Policy

Here are some of reviews of determints of dividend policy studies from previous studies that
been observed in some developed and developing countries. Following is dividend policy in
Malaysia and individual industry sector are discussed in this section.

One of the most argument and researchable topics among finance researchers is Dividend
Policy. One of the main question that always been asked by this researchers is whether
companies should pay dividend to its shareholder or not? According to Baker & Powell,
1999 many different model been develop in order to explain the dividend behaviour and some
have conducted personal survery to the top executive of the MNCs organization to be able
to deterimine their views about the dividend. ( Baker, Veit & Powell). Despite all this
extensive researcher , the question of paying dividend still a linger as a big question mark.

The first empirical studies of dividend policy was done by Litner ( 1956). He conduct a
survey of personnel of large firms in the United State and try to figure out how the corporate
manager make decision about dividen policy. He found out two important determinant that
cruical to determine the policy dividend that been practiced by US firms are current earning
and past dividend . Lintner's work was then refined by Fama and Babiak (1968). They used

8|Page
 Strategic Financial Managament FIN921

the statistical techniques of regression analysis, simulations and prediction tests to determine
the dividend payment in the U.S. firms during 1946-1964. They concluded that the net
earnings were a better measure of dividend rather than cash flow.

Followed by another surveys by Baker, Farelly and Edelman ( 1985, 1986) provide a useful
insights into what factors financial managers considered most important in determining their
firm’s dividend policy. On this surveyed include 562 New York Stock Exchange (NYSE)
firms with “normal” kinds of dividend polices in 1983. Based on this analysis of 318
responses from utility, manufacturing, and wholesale/retail firms, they found that the major
determinants of dividend payments were the anticipated level of future earnings and the
pattern of past dividends. In the 2006, Baker and Smith do another survey that involved
about 309 sample firms exhibiting behavior consistent with a residual dividend policy and
their matched counterparts to learn how they set their dividend policies. Their results showed
that for the sample and matched firms, the pattern of past dividends, the level and stability of
earnings, and desire to maintain a long-term dividend payout ratio elicit the highest level of
agreement from respondents.

In Malaysia scenario, a survey been conducted on dividend policies and practices among
Malaysian companies listed on the KLSE and on management's perception on the role of
dividend. He founds out that most companies in Malaysia practice stable dividend polices
(Mansor,1992). The second next popular policy was constant payout ratio. Factors that
been taken into consideration in choosing or decided a particular dividend policy are
shareholders expectations, company image and investment requirement are taken into
account.
In the same time, other factors influencing dividend are found to be current earnings and past
dividend practices. This findings are consistent with Lintner study on dividens. Mostly
Managers agreed that dividend is an important corporate decision . Malaysian managers also
believed that investors generally prefer companies with high dividend. This also in-line with
the findings that been conducted by Annuar and Shamsher (1993) investigated the
dividends and earnings behavior of firms listed on the Kuala Lumpur Stock Exchange
(KLSE). The data used consist of annual earnings and dividends for the period 1975 to 1989.
They found out that the dividend decisions of the firms partially depended on their current
earnings and past dividends, and firms have long-term target dividend which is conditioned
upon their earnings ability

9|Page
 Strategic Financial Managament FIN921

In the study of dividend trends, Fama and French (2001) found that the percentage of
dividend paying firms in the United States (US) fell from 67 percent of listed firms in 1978 to
21 percent in 1999. Ferris, Sen and Yui (2006) documented similar findings in the United
Kingdom (UK) market. As we known, UK’s market is similar to US in terms of breadth and
maturity. Their findings showed that the number of dividend paying firms in the UK declines
over the sample period and is most pronounced for the last five years of their analysis. At the
beginning of the sample period, nearly 76 percent of UK firms paid dividends, but by 2002,
only 54.5 percent of the sample firms pay dividends. They also found a similar decline from
60.2 percent to 28.6 percent for newly listed firms in the UK.

For Malaysian Market , a smiliar pattern been documented pattern by Norhayati ( 2005) in
her study of companies that listed on the Kuala Lumpur Stock Exchange ( known as Bursa
Malaysia), but the pattern seemingly related with the economic cycle. Her sample did not
include the companies in Finance and Unit Trust sector and only focusing on final dividend
announcement. Her findings showed from years 1981 to 1991, the percentage of firms that
paid dividends went down from 75 percent to 63 percent,however, the percentage of payers
increased to 83 percent in 1992 and continued to increase up until 1997, and went on a
downward trend from that year where there were only 55 percent final dividend payers in year
2000. Please be noted that Malaysia experienced two economic downturns in the sample
years, one in 1987 and the other in 1997. And the downward trend in dividends coincides with
the years before the economic downturn and later picked up after the economy recovered

6.0 Implicatians Dividend Policy to the Company & Stakeholders

When a company makes a profit, management must decide on what to do with those
profits. They could continue to retain the profits within the company, or they could pay out
the profits to the owners of the firm in the form of dividends. Once the company decides on
whether to pay dividends they may establish a somewhat permanent dividend policy, which
may in turn impact on investors and perceptions of the company in the financial markets.
What they decide depends on the situation of the company now and in the future. It also
depends on the preferences of investors and potential investors.

10 | P a g e
 Strategic Financial Managament FIN921

Dividend policy is the decision for the firm to pay out earnings verses retaining and
reinvesting them. Dividend decision has remained one of the tough challenges for financial
economists.

From the practitioner’s viewpoint dividend policy of a firm has an implication for investors,
managers, lenders and other stakeholders. For investors, dividends whether declared today or
accumulated and provided at a later date are not only a means of regular income, but also an
important input in valuation of a firm. Similarly, manager’s flexibility to invest in projects is
also dependent on the amount of dividend that they can offer to shareholders as more
dividends may mean fewer funds available for investment. Lenders may also have interest in
the amount of dividend firm declares, as more the dividend paid less would be the amount
available for servicing and redemption of their claims.

At the end of each year, every publicly traded company has to decide whether to return cash
to its stockholders, and if yes, and how much in the form of dividends. The owner of a private
company has to make a similar decision about how much cash he plans to with draw from the
business, and how much he has to reinvest, this we called the dividend decision.

11 | P a g e
 Strategic Financial Managament FIN921

7.0 DIVIDEND POLICY : EVIDENCE FROM YTL CORPORATION BERHAD

7.1 YTL CORPORATION BERHAD OVERVIEW

YTL Corporation Berhad is a Malaysian infrastructure conglomerate, founded by Tan Sri

Dato' Seri (Dr.) Yeoh Tiong Lay in 1955. His oldest son, Tan Sri Dato' Seri (Dr) Francis
Yeoh Sock Ping, became the Managing Director of YTL Corp in 1988. Under Yeoh's
stewardship, the YTL Group grew from a single listed entity in 1985 to a group of five listed
companies. Today, YTL Corp is one of the Bursa Malaysia's largest companies and together
with its listed subsidiaries has a combined Market Capitalisation of about RM30.8 billion
(USD 10.15 billion). The company has also been listed on the Tokyo Stock Exchange since
1996, being the first Asian non-Japanese company to be listed there. YTL Group had an
annual average compounded growth rate of 55% over the 15 years to 2010. YTL Corporation
Berhad and together with its four listed entities in Malaysia, has a combined market
capitalisation of about RM35.6 billion as at 30 June 2012, and total assets of over RM51.6
billion.

The group's portfolio of business includes power, utilities, cement, construction, real estate,
information technology and leisure in Asia-Pacific and Europe. These various business units
contributed at least RM1bil a year in dividends to YTL Corp. Amongst the group's key
businesses are utilities, operating and maintenance (O&M) activities, high speed
rail, cement manufacturing, construction contracting, property development, hotels & resorts,
technology incubation, real estate investment trust (REIT), and carbon consulting. YTL serves
more than 12 million customers in over three continents. In 2010 Malaysian Business
Magazine Top 100 Companies survey of Malaysia’s largest listed companies, YTL Corp has
emerged as the largest non-government linked company in Malaysia. YTL Corp has also been
named as one of the Top 250 Global Energy Companies in Asia under the Platts Top 250
Global Energy Company rankings and also earned a ranking of 15 overall in the Fastest
Growing Asian Companies. The chart 4 showing the YTL’s subsidaries .

12 | P a g e
 Strategic Financial Managament FIN921

Chart 4 : YTL Corp Organisational Structure

7.2 YTL CORPORATION BERHAD BUSINESS OVERVIEW

7.2.1 Utilities
YTL Corporation carries out its utilities activities through its subsidiary YTL Power
International Berhad (YTLPI), which is listed on the Bursa Malaysia Main Board (Stock
Code: 6742, Bloomberg: YTLP MK) with a Market Capitalisation of about RM 10.88 billion
(US 3.56 billion).

7.2.2 Operation & Maintenance (O&M) Actiivities

The YTL Corp group of companies has developed a wide intellectual capital base with strong
project development and management credentials and a deep pool of technical and operational
expertise, and carries out a wide range of O&M activities. Combined cycle gas-fired power
generation 100% stake in YTL Power Services Sdn Bhd, the O&M company operating 1,212
MW power stations in Paka & Pasir Gudang, Malaysia. Coal-fired power generation
100% stake in P.T. YTL Jawa Timur, the O&M company operating Jawa Power's 1,220 MW
power station in East Java, Indonesia. Electricity transmission and distribution
100% stake in PowerSeraya Limited in Singapore which has licensed capacity of 3,100 MW,
comprising oil-fired steam turbines, gas-fired combined cycle plants and diesel-fired open
cycle gas turbine plants.

13 | P a g e
 Strategic Financial Managament FIN921

High-speed rail - 50% stake in the O&M company for the Express Rail Link (ERL) high
speed rail link between KLIA & KL Sentral. YTL Corp holds a 50% stake in Express Rail
Link Sdn Bhd (ERLSB) and its wholly-owned subsidiary, ERL Maintenance Support Sdn
Bhd. ERLSB is the concession company responsible for constructing and operating the high-
speed rail link between Kuala Lumpur Sentral Station and Kuala Lumpur International
Airport under a 30-year concession (which includes an option to extend for further 30 years)
to own and operate the ERL.

The high-speed rail service, with a travelling time of 28 minutes to cover the 57km journey,
currently transports around 4.5 million passengers per annum. Built at RM35 million per km,
it is one of the cheapest high-speed rail links ever built (HK's Airport Express needed RM 450
million per km; London's Heathrow Express needed RM157million, according to research
report published by the Investment Bank ABN AMRO).

7.2.3 Cement Manufacturing

YTL Corporation carries out its Cement Manufacturing activities through its subsidiary YTL
Cement Berhad, which is listed on theBursa Malaysia Main Board (Stock Code: 8737,
Bloomberg: YTLC MK) with a Market Capitalisation of about RM 2.28 billion (US 745
million). YTL Cement is one of the largest, most efficient and profitable manufacturers of
Cement and ready mixed concrete products in Malaysia. YTL Cement also owns a 21.48%
stake in Jurong Cement Limited in Singapore and a 100% interest in Zhejiang Lin'an Jin Yuan
Cement Co Ltd in China.

7.2.4 Construction Contracting

YTL Corp's flagship construction arm is 100%-owned Syarikat Pembenaan Yeoh Tiong Lay
Sdn Bhd (SPYTL), which has successfully completed approximately RM7.25 billion
(US$2.1bn) worth of contracts on schedule and on budget. SPYTL is a "Class
A" Malaysian Turnkey contractor, which has built up a strong reputation for high quality
construction of buildings ranging from schools, army barracks, hospitals, hotels and high-rise
office blocks and large scale infrastructure projects on time and on budget. It has won many
awards for technological innovation in the building industry. SPYTL's civil engineering
expertise include building a gas-fired combined cycle power plant in a record 22 months, a
world record at the time, as well as building a 1.2m tonne per annum capacity state-of-

14 | P a g e
 Strategic Financial Managament FIN921

the-art cement plant. SPYTL also undertook the civil engineering construction on the RM2.4
billion Express Rail Link Project in Malaysia on schedule and on budget.

7.2.5 Property Development

YTL Corporation's residential property development activities are undertaken through 64%-
owned YTL Land & Development Berhad, which is listed on the Bursa Malaysia Main
Board (Stock Code: 2577, Bloomberg: YTLLMK) with a Market Capitalisation of about RM
1.01billion (US 329 million). YTL L&D has built up an excellent track record of building
high quality houses, apartments and condominiums with attractive and innovative designs.
YTL L&D currently has a land bank of more than 2,000 acres of strategic development land
in Malaysia. The estimated sales value is RM12 billion ringgit (US$ 3 billion). These strategic
land banks have no holding costs. Among YTL L&D's largest project at
present is Sentul, the innovative 294 acre residential and commercial development and
Malaysia's first private gated park in Kuala Lumpur, which is expected to generate an
estimated RM 8 billion (US$ 2.1 billion) in sales over the next 7 years. The first residential
development in both Sentul East and Sentul West sold very well.

7.2.6 YTL Hotels & Resorts

YTL Hotels is involved in both the ownership and management of Hotels and Resorts that
are a collection of brands differentiated by experiences yet consistent in quality, luxury,
authenticity and service. The philosophy of always being best in class, regardless of the
category of operation, is core to all aspects of the company's activities, with both service and
operational excellence being the key drivers.

7.2.7 Technology Incubation

YTL e- Solutions Bhd (YTLE) is listed on the ACE Market of Bursa Malaysia with a market
capitalisation of approximately RM949 million (US$311 million). YTLE is part of the YTL
Corporation Berhad Group, one of Malaysia's leading infrastructure conglomerates.
YTLE's key activities in Malaysia comprise development, ownership and operation of
narrowcast digital media networks through Infoscreen Networks PLC, which is listed on the
AIM Market of the London Stock Exchange, and wireless fixed broadband services
throughAirzëd Services Sdn Bhd. YTLE's most prized asset is its 2.3GHz Worldwide
Interoperability for Microwave Access (WiMAX) spectrum in Peninsular Malaysia, which is
owned through Y-MAX Networks Sdn. Bhd.
15 | P a g e
 Strategic Financial Managament FIN921

7.2.8 REIT
Starhill Real Estate Investment Trust (REIT) has a market capitalisation of approximately
RM1,470 million (as at 31 May 2013) and comprises two prime properties situated in the
heart of Kuala Lumpur's Golden Triangle, namely, the JW Marriott Hotel Kuala Lumpur and
60 units of serviced apartments, 4 levels of commercial podium and 2 levels of car parks
located within The Residences at The Ritz-Carlton, Kuala Lumpur ("The Residences
Properties") (collectively referred to as the "Properties").

Starhill REIT was established by a trust deed entered into on 18 November 2005 between
Pintar Projek Sdn Bhd and Mayban Trustees Berhad, as manager and trustee, respectively, of
Starhill REIT. Listed on 16 December 2005 on the Main Market of Bursa Malaysia Securities
Berhad, Starhill REIT's principal investment strategy is to invest in a diversified portfolio of
income-producing real estate, used primarily for retail, office and hospitality purposes, with
particular focus on retail and hotel properties. The primary objectives of Starhill REIT are to
provide unitholders with stable cash distributions with the potential for sustainable growth,
principally from the ownership of properties, and to enhance long-term unit value.
Starhill Global Real Estate Investment Trust (formerly known as Macquarie Prime REIT) was
listed on the Singapore Stock Exchange on 20 September 2005. The Singapore-based real
estate investment trust had an initial property portfolio comprising stakes in two landmark
properties along Singapore's famed Orchard Road shopping belt, namely Ngee Ann
City andWisma Atria. In 2008, Starhill Global REIT acquired seven properties located in the
prime areas of Roppongi, Shibuya-ku, Minato-ku and Meguro-ku in Tokyo, and a premier
retail property in Chengdu, China. Most recently, in 2010, Starhill Global
REIT acquired Starhill Gallery and parcels in Lot 10 in Kuala Lumpur, Malaysia, and the
David Jones Building in Perth, Australia, increasing the trust's portfolio size to approximately
S$2.1 billion.

7.2.9 Carbon Consulting

YTL-SV Carbon is a subsidiary of YTL Corp Bhd acquired in 2008. YTL Corporation Bhd
acquired a 75% stake in the Malaysian-based Clean Development Mechanism (CDM)
developer, SV Carbon, now known as YTL-SV Carbon Sdn. Bhd. YTL-SV Carbon is
currently the largest CDM consultancy in Malaysia and the fifth largest in ASEAN with
projects in Malaysia, Indonesia, Vietnam and China. YTL-SV Carbon
provides end-to-end solutions for projects under CDM, handling all aspects of the process
16 | P a g e
 Strategic Financial Managament FIN921

including identification of potential projects, development of the full scope of CDM

documentation such as the Project Design Document (PDD), CDM registration and the
approval and sale of carbon credits regionally and globally.

Projects undertaken by YTL SV-Carbon include those in the areas of biomass, biogas and
clean energy from agricultural, municipal and industrial, solid and liquid waste, cement and
steel. YTL-SV Carbon also works with plantation companies to develop clean energy from
biomass waste and effluent plants. With approximately 50 projects in development
and more than 15 projects registered at the UNFCCC, YTL-SV Carbon has broad experience
with various types of CDM projects under its belt, with special expertise in the palm oil,
energy and waste management sectors.

7.3 YTL CORPORATION BERHAD 5 YEARS FINANCIAL ANALYSIS

Table 1 : YTL Corp Revenue & Gross Profit Since 2008-2012

17 | P a g e
 Strategic Financial Managament FIN921

Table 2 : YTL Corp EPS Reconciliation Since 2008-2012

Table 3:YTL Dividend Per Share, Total Assets & Net Assets Per Share since 2008-2012

18 | P a g e
 Strategic Financial Managament FIN921

7.3.1 YTL Corp Financial Performance 2012

The Group achieved a 10.0% growth in revenue to RM20,195.8 million for the financial year
ended 30 June 2012, compared to RM18,354.8 million for the previous financial year ended
30 June 2011. Profit before taxation increased marginally to RM2,450.2 million for the
financial year under review, compared to RM2,351.9 million last year, whilst net profit
attributable to owners of the parent increased 14.2% to RM1,181.1 million this year over
RM1,034.6 million last year. The improved performance for the financial year ended 30 June
2012 resulted from better performance of the Group’s multi-utilities and cement operations, as
well as the property development division. The Group’s foreign operations continue to be
largest contributors, with overseas operations accounting for approximately 75.7% of the
Group’s revenue and 80.5% of non-current assets for the 2012 financial year, compared to
79.7% and 71.2%, respectively, last year.

The improved performance for the financial year ended 30 June 2012 resulted from better
performance of the Group’s multi-utilities and cement operations, as well as the property
development division. The Group’s foreign operations continue to be largest contributors,
with overseas operations accounting for approximately 75.7% of the Group’s revenue and
80.5% of non-current assets for the 2012 financial year, compared to 79.7% and 71.2%,
respectively, last year.

7.3.2 YTL Corp Dividend Policy 2012

7.3.2.1 New Dividend Policy

YTL Group has announced its new dividend policy whereas since its listing on the Kuala
Lumpur Stock Exchange in 1986, the YTL Group has consistently declared dividends of not
less than 5% for 17 consecutive years. In addition, the Group has recorded compounded
earnings growth of 42% over the same period. With the successful launch of the ERL in
Malaysia, and the acquisitions of ElectraNet in Australia and Wessex Water in the United
Kingdom, the Group is confident that it will be able to sustain this substantial increase in
dividends over the next 5 years.

19 | P a g e
 Strategic Financial Managament FIN921

7.3.3 YTL Corp Financial Performance 2011

The Group achieved an 11.2% growth in revenue to RM18,354.8 million for the financial year
ended 30 June 2011, compared to RM16,505.0 million for the previous financial year ended
30 June 2010. Profit for the year grew 13.4% to RM1,835.9 million this year, compared to
RM1,619.1 million last year, whilst net profit attributable to shareholders registered a 22.6%
increase to RM1,034.6 million over RM844.2 million last year. The improved performance
for the financial year ended 30 June 2011 resulted from better performance of the Group’s
power generation, water and cement operations and overseas property development projects.
The Group’s foreign operations notably its Singapore utilities operation PowerSeraya and
UK Based Water and Sewerage Company, Wessex Water continue to be the largest
contributors, with overseas operations accounting for approximately 79.7% of the Group’s
revenue and 71.2% of non-current assets for the 2011 financial year, compared to 79.8% and
74.0%, respectively, last year.

7.3.4 YTL Corp Dividend Policy 2011

YTL Corp declared a first interim single tier dividend of 2 sen or 20% per ordinary share of
10 sen each for the financial year ended 30 June 2011, the book closure and payment dates for
which are 9 November 2011 and 24 November 2011, respectively. Therefore, the Board of
Directors of YTL Corp did not recommend a final dividend in respect of the financial year
ended 30 June 2011. This is the 27th consecutive year that YTL Corp has declared dividends
to shareholders since its listing on the Main Market of Bursa Malaysia Securities Berhad in
1985.

7.3.5 YTL Corp Financial Performance 2010

The Group achieved an 85.6% growth in revenue to RM16,505.0 million for the financial year
ended 30 June 2010, compared to RM8,892.1 million for the last financial year ended 30 June
2009. Profit before taxation stood at RM2,284.1 million for the 2010 financial year, whilst
profit for the financial year increased to RM1,624.7 million, a growth of 15.9% compared to
RM1,401.6 million last year. The Group’s foreign operations notably PowerSeraya (
Singapore) and Wessex Water Limited ( UK) continue to be large earnings contributors,

20 | P a g e
 Strategic Financial Managament FIN921

with overseas operations accounting for approximately 79.8% of the Group’s revenue for the
2010 financial year compared to 63.9% last year.

7.3.6 YTL Corp Dividend Policy 2010

The Board of Directors of YTL Corp is pleased to recommend for shareholders’ approval a
first and final dividend of 20% or 10 sen per ordinary share of 50 sen each gross less
Malaysian income tax for the financial year ended 30 June 2010. This dividend is
recommended in concurrence with the Group’s policy of creating value for shareholders
through a sustainable dividend policy.

7.3.7 YTL Corp Financial Performance 2009

The Group achieved a 35.8% growth in revenue to RM8,892.1 million for the financial year
ended 30 June 2009, compared to RM6,549.9 million for the previous financial year ended 30
June 2008. Profit before taxation grew 25.0% to RM2,288.2 million for the financial year
under review, compared to RM1,829.8 million last year, whilst profit for the financial year
grew to RM1,401.6 million this year over RM1,376.5 million last year. The growth in the
Group’s revenue for the financial year ended 30 June 2009 was due to the consolidation of 4
months’ results from PowerSeraya which was acquired in March 2009, whilst the acquisition
of its stake in Starhill Global REIT resulted in an increase in profit due to the recognition of
the fair value excess of the REIT’s identifiable assets and liabilities over the cost of the
investment. Improved operational efficiencies and selling prices in the cement division also
contributed to the better financial performance for the year under review. The Group’s
foreign operations such as Jawa Power ( Indonesia) , Wessex Water (UK) and PowerSeraya
(Singapore) continue to be large earnings contributors, with overseas operations accounting
for approximately 63.9% of the Group’s revenue and 84.2% of total assets for the 2009
financial year, compared to 49.3% and 63.2%, respectively, for the previous financial year.
financial year.

21 | P a g e
 Strategic Financial Managament FIN921

7.3.8 YTL Corp Dividend Policy 2009

The Board of Directors of YTL Corp is pleased to recommend for shareholders’ approval a
first and final dividend of 15% less Malaysian Income Tax in respect of the financial year
ended 30 June 2009. This dividend is recommended in concurrence with the Group’s policy
of creating value for shareholders through a sustainable dividend policy. This is the 25th
consecutive year that YTL Corp has declared dividends to shareholders since listing on the
Main Board of Bursa
Securities in 1985.

7.3.9 YTL Corp Financial Performance 2008

The Group achieved an 8.9% growth in revenue to RM6,549.9 million for the financial year
ended 30 June 2008, compared to RM6,015.3 million for the previous financial year ended 30
June 2007, whilst profit before tax grew to RM1,829.8 million for the 2008 financial year, a
17.6% increase over RM1,555.7 million for the last financial year. The improvements in the
Group’s revenue and profit for the financial year ended 30 June 2008 were principally due to
better performance recorded by the Group’s overseas operations in its utilities division, as
well as improved operational efficiencies and selling prices in the cement division. The
Group’s foreign operations continue to be large earnings contributors, with overseas
operations accounting for approximately 49.3% of the Group’s revenue and 63.2% of total
assets for the 2008 financial year, compared to 48.2% and 63.0%, respectively, for the
previous financial year.

7.3.10 YTL Corp Dividend Policy 2008

YTL Corp maintained returns to shareholders during the financial year under review with the
distribution of 3 interim dividends of 15% each and a restricted offer for sale of 1 ordinary
share of RM0.50 in YTL Power International Berhad (“YTL Power”), a subsidiary of YTL
Corp listed on the Main Board of Bursa Malaysia Securities Berhad (“Bursa Securities”), for
every 15 ordinary shares of RM0.50 each held in YTL Corp at an offer price of RM1.00 per
YTL Power share, which was completed on 18 January 2008. The Board of Directors of YTL
Corp is pleased to recommend for shareholders’ approval a Final Dividend of 5% less
Malaysian income tax for the financial year ended 30 June 2008. This dividend is
22 | P a g e
 Strategic Financial Managament FIN921

recommended in concurrence with the Group’s policy of creating value for shareholders
through a sustainable dividend policy. This is the 24th consecutive year that YTL Corp has
declared dividends to shareholders since listing on the Main Board of Bursa Securities in
1985.

7.4 A Snapshot of YTL Group

8.0 SUMMARY

8.1 Prospect Investment 2013

The utility-based nature of a significant part of the Group’s businesses, together with its
financial stringency and diversified operations are expected to enable the Group to continue
to weather the ongoing volatility plaguing world markets. Malaysia’s GDP growth for the
full 2012 calendar year is expected to remain on its current trajectory to average at 4.5% to
5.0%, driven mainly by private consumption and investment. The global economy remains
vulnerable to downside risks, with the Eurozone crisis and ongoing uncertainties in the major
economies continuing to impact business and consumer confidence. YTL Corp will remain
focused on further reinforcing its financial and operational strength in order to protect its
businesses and enhance shareholder value.

YTL Corp declared a second interim dividend of 15% or 1.5 sen per share, the book closure
and payment dates for which are 14 March 2013 and 29 March 2013, respectively.
YTL Group Managing Director Tan Sri Dato’ (Dr) Francis Yeoh Sock Ping, CBE, FICE, said,

23 | P a g e
 Strategic Financial Managament FIN921

“The Group has achieved another strong quarter, with revenue topping RM10 billion for the
half-year. Anchored water and sewerage operations in the UK and power generation and
merchant multi-utilities activities in Singapore, the Group’s utilities division continued to
drive growth. The division has also made strides in growing the subscriber base in the mobile
broadband division which owns and operates the YES 4G network.

Profit in the cement division increased due to better selling prices for cement and improved
concrete sales. Meanwhile, the completion of several projects in Singapore show a lower
revenue recognition in the property development division but this was offset by higher profits
contributed by our investment in Starhill Global REIT, which owns prime retail and office
properties in Singapore’s Orchard Road, Kuala Lumpur’s Golden Triangle and Tokyo’s
upscale retail districts, as well as a retail mall in Chengdu, China, and the David Jones
Building and recently-acquired Plaza Arcade in Perth.

8.2 Revenue Generate by Year Since 2008-2013

Table 1 : YTL Corp Revenue, Profit Before Taxation & After Taxation since 2008-2012

24 | P a g e
 Strategic Financial Managament FIN921

8.3 Dividend Payment History Since 2008-2013

YTL Corp’s dividends in respect of the 2012 financial year amounted to a 20% cash dividend,
as well as a share dividend of 1 treasury share for every 15 YTL Corp shares held. We also
announced a renounceable offer for sale of warrants in YTL Power International Berhad, on
the basis of 1 warrant for every 15 YTL Corp shares held, at an offer price of RM0.20 per
warrant, which represents a significant discount to market price. Taken together, these
amounted to a value of approximately 16.1 sen per share and a yield of about 8.9% based on
the prevailing market price.

Table 4:YTL Corp Dividend Per Share,Total Assets & Net Assets Per Share since 2008-
2012

25 | P a g e
 Strategic Financial Managament FIN921

8.4 YTL Corp Berhad Stock Market Pricing Movement Since 2008-2013

26 | P a g e
 Strategic Financial Managament FIN921

9.0 Recommendation For Investor

Our group member suggest to buy this company stock based on the fundamental and technical
analysis and certain elements that must be considered :

1. During the year under review, YTL Corp distributed an interim dividend of 2 sen or
20% per ordinary share of 10 sen in respect of the financial year ended 30 June 2012, as well
as a share dividend on the basis of 1 treasury share for every 15 shares held in the Company.
Therefore, the Board of Directors of YTL Corp did not recommend a final dividend in respect
of the financial year ended 30 June 2012. This is the 28th consecutive year that YTL Corp has
declared dividends to shareholders since its listing on the Main Market of Bursa Malaysia
Securities Berhad (“Bursa Securities”) in 1985.

2. The YTL Corp Group’s strong financial profile is the result of a system of internal
control and risk management designed to mitigate risks which arise in the course of business.
This is exemplified by the YTL Corp Group’s strategy of acquiring regulated assets and
financing acquisitions on a non-recourse basis. These include YTL Power International
Berhad’s wholly-owned subsidiaries, YTL Power Generation Sdn Bhd, Wessex Water and
YTL PowerSeraya, as well as its interests in ElectraNet Pty Ltd and P.T. Jawa Power. These
assets share common characteristics of highly predictable operating costs and revenue
streams, which in turn generate stable and predictable cash flows and profits, underpinned by
an established regulatory environment in their respective markets of operation.

3. The Group achieved a 10.0% growth in revenue to RM20,195.8 million for the
financial year ended 30 June 2012, compared to RM18,354.8 million for the previous
financial year ended 30 June 2011. Profit before taxation increased marginally to RM2,450.2
million for the financial year under review, compared to RM2,351.9 million last year, whilst
net profit attributable to owners of the parent increased 14.2% to RM1,181.1 million this year
over RM1,034.6 million last year.The improved performance for the financial year ended 30
June 2012 resulted from better performance of the Group’s multi-utilities and cement
operations, as well as the property development division.

27 | P a g e
 Strategic Financial Managament FIN921

4. The Group’s foreign operations continue to be largest contributors, with overseas

operations accounting for approximately 75.7% of the Group’s revenue and 80.5% of non-
current assets for the 2012 financial year, compared to 79.7% and 71.2%, respectively, last
year.

10.0 Conclusion

In Malaysia, there is not much academic literature that describes the dividend policy for
Malaysian companies, except for a survey conducted by Minority Shareholder Watchdog
Group and University of Technology MARA (MSWG, 2006). They examine top 100
companies as per market capitalisation on 31 December 2005. The survey examines the
companies’ behaviour on dividend distribution over a three-year period of 2002-2004. The
market value of the top 100 public-listed companies ranged from RM983 million to
RM41,972 million as at 31 December 2005. The survey found that most of the companies
paid dividends in the three-year period. By examining the characteristic of the dividend
payers and non-dividend payers, the survey proposed that profitability and liquidity are two
essential ingredients for a healthy, dividend-paying public listed company. Companies with
these two healthy components send out signals that they are able to sustain their dividend
payment in the future.

28 | P a g e
 Strategic Financial Managament FIN921

REFERENCES

Allen, f. and Michaely, R. (1995) 'Dividend policy', north Holland handbooks of operations
research and management science, pp. 14-94.

Allen, F. and Michaely, R. (2003) 'Payout policy', in Constantinides, G.M., Harris, M. and
Stulz, R.M. (ed.) Handbook of the Economics of Finance, North-Holland, Amsterdam.

Annuar, M. N. and Shamsher, M. (1993). The dividend and earnings behavior of firms on the
Kuala Lumpur StockExchange. Pertanika Journal of Social Sciences and Humanities, 1(2),
171-177.

Baker, H. K. & G.E. Powell. (1999). How Corporate Managers View Dividend Policy.
Quarterly Journal of Business and Economics. Lincoln, (Spring).

Baker, H. K. and Smith, D. M. (2006). In search of a residual dividend policy. Review of

Financial Economics, 15(1), 1-18.

Baker, H. K., E. T. Veit & G. E. Powell. (2001). Factors Influencing Dividend Policy
Decisions of Nasdaq Firms. The Financial Review, Eastern Finance Association, (August).

Baker, H. K., Farrelly, G. E. and Edelman, R. B. (1985). A survey of management views of

dividend policy. Financial Management, 14(3), 78-84.

Fama, E. F. and French, K. R. (2001). Disappearing dividends: Changing firm

characteristics or lower propensity to pay? Journal of Financial Economics, 60(1), 3-43.

Fama, E.F. and Babiak, H. (1968) Dividend policy: an empirical analysis. Journal of
American Statistical Association, 63, 1132 –1161.

Investopedia Staff. (2003). How and Why Do Companies Pay Dividends?. Available:
http://www.investopedia.com/articles/03/011703.

Investopedia.(2007).Dividends.Available:http://www.investopedia.com/terms/d/dividendpolic
y. asp.

Lintner, J. (1956) The distribution of incomes of corporations among dividends, retained

earnings, and taxes. American Economic Review, 46, 97 – 113.

Mansor, M. I. (1993) Dividend and share value: the case of Malaysia. Securities Industry
Review,19, 43 – 56.

Wikipedia. (2007). Dividends. Available: http://en.wikipedia.org/wiki/Dividend.

YTL Corporation Berhad_Annual Report 2008.

YTL Corporation Berhad_Annual Report 2009.

29 | P a g e
 Strategic Financial Managament FIN921

YTL Corporation Berhad_Annual Report 2011.

YTL Corporation Berhad_Annual Report 2011.

YTL Corporation Berhad_Annual Report 20110.

YTL Corporation Berhad_Annual Report 2012.

YTL Corporation Berhad_Sustainability Report 2008.

YTL Corporation Berhad_Sustainability Report 2009.

YTL Corporation Berhad_Sustainability Report 2010.

YTL Corporation Berhad_Sustainability Report 2011.

YTL Corporation Berhad_Sustainability Report 2011.

YTL Corporation Berhad_Sustainability Report 2012.

30 | P a g e