TYCOON Tan Sri Yeoh Tiong Lay and his family strengthened their grip on YTL Corp Bhd, YTL Power International Bhd and YTL Land & Development Bhd, at a time when the share prices of the three companies were falling.

Within the sprawling business empire of the YTL Group, there are five listed vehicles: YTL Corp, YTL Power, YTL Land, YTL Hospitality REIT and YTL e-Solutions Bhd.

YTL Corp, one of the largest conglomerates in Malaysia, is the parent company of the other four, with a 49.88% direct stake in YTL Power, 65.26% in YTL Land, 56.44% in YTL REIT and 74.12% in YTL e-Solutions (see chart).

Some notable share transactions were made last December, namely YTL Corp mopping up shares in YTL Power and YTL Land, and the Yeoh family accumulating shares in YTL Corp.

It is worth noting that last year, YTL Power and YTL Land saw their share prices fall 10.4% and 16% respectively. YTL Corp’s share price had also fallen 4% from a 52-week high of RM1.662 on May 21.

Research analysts who cover the YTL stocks tell The Edge that attractive valuation and positive outlook for the companies’ dividend payments could have led to the Yeoh family’s move.

A financial analyst, who tracks the Yeoh family closely, opines that purchasing more shares of these companies as prices declined could be perceived as a value buy for them.

“If the Yeoh family doesn’t support the share prices, they might fall further. As the family members are sitting on the board, they should know the intrinsic value (of these companies) better than third-party investors,” he says.

Tiong Lay, 84, the patriarch of the Yeoh family, is the executive chairman of YTL Corp and YTL Power. His eldest son Tan Sri Francis Yeoh Sock Ping is the managing director of YTL Corp, YTL Power and YTL Land, and all his six siblings are on the boards of YTL Corp and YTL Power.

The analyst adds that at YTL Power, the Yeoh family members have been actively converting their warrants into mother shares, while YTL Corp has been buying back more shares in the utility group.

“No businessmen will do that unless they know they will receive something in return. Minority shareholders are likely to benefit from this kind of situation,” he says.

Another equity analyst from a local investment bank concurs, adding that the low share prices provided the opportunity for the Yeoh family to raise its stakes in these companies.

“If we look at the price-to-book value (P/BV), their shares are undervalued,” he says.

A check on Bloomberg shows that YTL Corp was traded at an average P/BV of 1.39 times in the financial year ended June 30, 2013 (FY2013), before it dropped to 1.26 times in FY2014. The counter is currently traded at 1.17 times.

Similarly, the P/BV of YTL Power had fallen from 2.3 times in FY2011 to 1.55 times in FY2012 and 1.25 times in FY2013. It is currently traded at 0.96 times.

Meanwhile, YTL Land’s P/BV had declined from 2.04 times in FY2011, 1.62 times in FY2012 0.85 times in FY2013 to 0.82 times in FY2014. The stock is currently traded at 0.63 times.

To recap, YTL Corp had purchased close to 70 million YTL Power shares last month. The Yeoh siblings have also converted at least 49 million warrants to YTL Power shares since early October. The derivatives will only expire in 2018, thus raising the question of what prompted them to convert the warrants now.

Although YTL Corp owned directly and indirectly 57.76% in YTL Power as at Sept 26, 2014, its latest shareholding is 56.78%, despite the buying. This is due to the dilutive effect of the warrant conversion.

On Dec 2, YTL Corp purchased a 7.37% stake in YTL Land, raising its stake to 65.26% from 57.89%. This was the first time YTL Corp had bought YTL Land shares since April 2011.

Meanwhile, Yeoh Tiong Lay & Sons Holdings Sdn Bhd, the private investment vehicle of the Yeoh family, had on Dec 18 bought 93.1 million shares in YTL Corp, raising its stake from 48.66% to 49.56%. The family had not accumulated any shares in YTL Corp since October 2012.

Interestingly, the management of YTL Corp has been holding back on paying out dividends for more than two decades as its various units needed cash to expand their businesses or for mergers and acquisitions.

However, with the RM14 billion consolidated cash that YTL Corp has on its balance sheet, it can now afford to do so.

In a Sept 10 report, CIMB Research analyst Lucius Chong said YTL Corp can pay dividend per share (DPS) of at least 10 sen per annum. With its 49.56% stake in YTL Corp, Yeoh Tiong Lay & Sons is set to receive some RM540 million a year in dividends.

“YTL Corp’s dividend story is now being put into practice. The interests of management and minority shareholders are now fully aligned,” he comments.

YTL Corp declared a 9.5 sen third interim dividend on Aug 28, bringing its total DPS in FY2014 to 12 sen, an 80% net payout ratio. Between FY2010 and FY2013, the company’s DPS ranged from 1.5 sen to 4 sen.

The key driver was YTL Cement Bhd, which was taken private in April 2012. It was the biggest contributor to the payout, accounting for at least 40% of YTL Corp’s dividend income stream.

This article first appeared in The Edge Malaysia Weekly, on January 12 - 18 , 2015.

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