KUALA LUMPUR (Sept 22): The appreciation of the market capitalisation of YTL Corp Bhd and its 49%-owned YTL Power International Bhd has raise their chances of being included into the 30-stock FBM KLCI in the upcoming November review, according to Hong Leong Investment Bank (HLIB).

“Based on the current market capitalisation of YTL Corp and YTL Power, both entities are currently ranked above the 25th position within the KLCI. If this is maintained, both will be automatically included into the bellwether index in the upcoming November review,” HLIB said in a note on Friday.

The excitement mainly revolves around YTL Power, whose prospects HLIB remains upbeat about, with guided earnings sustainability for the next three years, partly driven by the group’s power business in Singapore through YTL PowerSeraya Pte Ltd.

“PowerSeraya’s earnings are expected to be stronger for the financial year ending June 30, 2024, driven by the tight power market situation, high lock-in retail prices, and low liquefied natural gas cost in the long term,” said the investment bank.

Moreover, HLIB said YTL Power’s venture into renewable energy (RE) and digitalisation areas are strategically in line with the government’s National Energy Transition Roadmap (NETR).

The group has planned for 500 megawatt (MW) in data centre capacity over 10 years, investments worth RM15 billion.

HLIB said the first phase of 72MW, of which 48MW is secured for SEA Ltd, is under construction, and will be completed in stages over four years, with contributions starting in early 2024.

“When the assets mature, we do not discount potential monetisation,” said the investment bank.

HLIB said the development of YTL Power's 500MW large-scale solar project will eventually be developed to support the green energy supply to the group’s data centres.

“We believe there is an exciting future for the segment, as demand for green data centres is on the rise, with new opportunities to export RE to Singapore under the NETR by leveraging PowerSeraya,” it said.

Therefore, HLIB opined that YTL Power’s current valuation is “undemanding”, while earnings and dividends may “continue to surprise to the upside”.

The investment bank kept its “buy” rating and target price unchanged at RM2.90.

YTL Power's share price, which had tripled year-to-date (YTD), was one sen or 0.5% lower at RM2.10 at 10.53am on Friday, valuing it at RM17.3 billion.

YTL Corp, meanwhile, was trading one sen or 0.66% lower at RM1.51 a share, valuing it at RM16.64 billion. The stock had climbed 2.6 times YTD.

HLIB does not have a rating for YTL Corp, but has opined that it has a fair value of RM2.10.