KUALA LUMPUR (Nov 1): Independent power producer YTL Power International Bhd has become a substantial shareholder of smaller rival Ranhill Utilities Bhd, after acquiring 243.33 million shares, equivalent to an 18.87% stake, in Ranhill.

In a bourse filing, YTL Power said the transaction was made on Wednesday.

At Wednesday's noon market break, shares in Ranhill settled up half a sen or 0.86% at 58.5 sen, with 1.08 million shares done.

Ranhill's counter was trading in the range of 58 sen to 59.5 sen in the morning session on Wednesday when the announcement was made, which a back-of-the-envelope calculation would suggest that YTL Power fork out between RM141.13 million and RM144.78 million for the 18.87% stake in Ranhill.

Meanwhile, YTL Power shares closed the morning session down two sen or 0.95% at RM2.09 per share, with 4.6 million shares traded.

At market close, Ranhill emerged as the top gainer on the local bourse, surging 15.5 sen or 26.7% to 73.5 sen, giving it a market capitalisation of RM953.1 million. Its share price has risen 61.5% so far this year.

YTL Power, on the other hand, gained seven sen or 3.3% to settle at RM2.18, giving it a market value of RM17.8 billion.

In a note to clients following the announcement on Wednesday, MIDF Research said it understands the 18.87% block was acquired from Cheval Infrastructure Fund LP, which in turn is expected to cease to be a shareholder of Ranhill.

"Our quick channel checks suggest this is a strategic investment decision for YTL Power, as it sees good assets within the Ranhill group, such as its exclusive rights to Johor water supply and Sabah power sector exposure. Ranhill has been building exposure to the renewable energy (RE) sector via its soon-to-be-operationalised 50-megawatt (MW) Large Scale Solar 4 (LSS4) plant, and is actively looking to expand its presence in this space," the local research firm said.

It noted that YTL Power is similarly building its presence in Johor and RE via its upcoming 72MW data centre (Phase 1) and 500MW solar farm in Kulai, Johor.

"YTL Power has also indicated interest to participate in RE exports to Singapore, pending finalisation of the RE export framework by the government," MIDF Research added.

Since YTL Power’s stake is still below the 20% threshold, the research firm said it sees no impact on YTL Power’s earnings at this point, unless there is intention to increase its stake further in Ranhill, and if any strategic venture with Ranhill is on the cards.

"The entry of a large multinational utility as YTL Power into Ranhill speaks volumes of the value of the latter," MIDF Research said, reaffirming its "buy" calls on Ranhill, with a target price (TP) of 80 sen, and YTL Power, with a TP of RM2.45.