KUALA LUMPUR (May 26): YTL Power International Bhd ended Friday (May 26) nine sen or 7.83% higher to RM1.24, its highest in five years since closing at RM1.27 on July 24, 2018, after its latest set of results beat analysts’ expectations.
At RM1.24, the stock had a market capitalisation of RM10.12 billion.
The counter was among the most active stocks on Bursa Malaysia in Friday morning trade, being the seventh most active stock on the local bourse with 15.41 million shares traded, triple its 200-day average volume of 5.29 million.
At market close on Friday, its trading volume swelled to 42.26 million shares.
Analysts raised YTL Power’s stock price after its financial performance for the third quarter and nine months ended March 31, 2023 (3QFY2023 and 9MFY2023) exceeded their forecasts.
Maybank Investment Bank raised its TP to RM1.50 from RM1 previously, while Hong Leong Investment Bank (HLIB) Research raised its TP to RM2.05 from RM1.50. Meanwhile, Kenanga Research upped its TP to RM1.48 from RM1.09.
The analysts said YTL Power’s earnings were largely driven by its YTL PowerSeraya Pte Ltd subsidiary in Singapore; however, this was somewhat offset by the losses at Wessex Water Services Ltd which were due in part to index-linked interest costs.
"Post-acquisition of [Tuaspring Pte Ltd’s 396MW combined cycle gas turbine power plant in Singapore] in 4QFY2022, [PowerSeraya] continued to deliver exceptionally strong earnings year to date, leveraging onto the new asset, higher retail prices and locked-in low gas prices to expand its market share and improve its overall margins.
"The subsidiary is also expected to gain from the awarded 100MW export/import contract to Singapore from Malaysia and building electric charging points (not less than 1,200 units) at Housing & Development Board carparks in Singapore.
"The recent approval by [the] Malaysian government to allow export of RE (renewable energy), is expected to benefit YTLP (YTL Power), as the group continues to seek earnings growth through RE exports to Singapore. Wessex Water is expected to turn around in the subsequent quarter after the tariff revision of [an increase of] 9% effective April 2023.
"Yes Communications remains a concern given the recent sharp drop in services revenue. The subsidiary continues to explore innovative 5G services by leveraging onto DNB (Digital Nasional Bhd).
"The group is also developing YTL Green Data Centre (first development with Sea Ltd), supported by the development of 500MW LSS [large-scale solar farm] in Kulai. Furthermore, the group will also leverage onto the awarded digital banking licence (Sea Ltd-YTLP Power consortium), targeting the MSMEs (micro, small and medium enterprises) segment," wrote HLIB Research's Daniel Wong in a Friday note.
Wong kept his "buy" rating on the group.
Meanwhile, Maybank Research analyst Tan Chi Wei said: "We expect earnings to stay elevated in the upcoming quarters as 1) Singapore generation trends seasonally higher, and 2) Wessex’s tariff hike takes effect next quarter. We raise our net profit forecasts for FY2023 by 90%, FY2024 by 83% and FY2025 by 90% to incorporate latest run rates."
"YTL Power is now our preferred pick in the utilities space," Tan added, while maintaining his "buy" rating on the group.
Meanwhile, Kenanga Research's Teh Kian Yeong said the research house is raising its earnings forecasts for FY2023 by 54% and FY2024 by 16%, to reflect higher retail prices for its power generation business in Singapore.
"However, we maintain our FY2023-2024 forecast NDPS (net dividend per share) assumption of five sen annually. We upgraded our SOP (sum-of-parts)-based TP by 36% to RM1.48 from RM1.09, after: (i) upgrading its Singapore power generation unit’s valuation, (ii) adding new valuation for data centre business, (iii) updating other investments to include the Jordanian Attarat Power, and (iv) tweaking net cash position aligned to FY2022A. There is no adjustment to our TP based on ESG (environment, social and governance) given a 3-star rating as appraised by us," Teh said.