KUALA LUMPUR (Jan 24): Shares of YTL Corporation Bhd (KL:YTL) and YTL Power International Bhd (KL:YTLPOWR) fell on Friday in active trade after the companies revealed plans to issue non-tradable warrants exercisable at a discount to market prices.
During early trade, YTL Corporation fell nearly 5% to RM2.27, valuing the group at more than RM25 billion, while YTL Power was down more than 6% to RM3.80, translating into a market capitalisation of about RM32 billion.
As of 9.15am, YTL Corporation Bhd (KL:YTL) was trading at RM2.29 after more than five million shares changed hands, while YTL Power was at RM3.83 as trading volume totalled 9.1 million shares.
The proposed bonus issue of warrants involves the issuance of up to 1.67 billion free warrants on a one-for-five basis, with the exercise price set at RM2.45, which represents a 44% discount or RM1.92 to the five-day volume-weighted average market price of RM4.3721.
These warrants, which will not be listed and cannot be traded or transferred, have a tenure of three years and can be exercised at any time before the expiry date.
Should the warrants be exercised, this would increase YTL Power’s share base by 20% or an issue of up to 1.674 billion new shares.
Essentially a flexible ‘rights issue’
CIMB Securities in a note on Friday said: "...we see (this bonus issue of warrants) as essentially a flexible ‘rights issue’.
"All else equal, a rights issue is neutral on shareholders’ wealth. However, it could potentially be positive if proceeds are used to fund new projects with attractive returns or to increase equity stake in existing value-accretive projects, and vice versa."
The research house said while rights issues can sometimes trigger negative near-term share price correction, it does not expect the reaction to be "as bad", given that investors do not need to immediately fork out cash.
CIMB Securities maintained its “buy” call on YTL Power with a target price of RM5.20, based on YTL Power’s FY2026F enterprise value to earnings before interest, taxes, depreciation and amortisation (EV/Ebitda) of 7.0 times, which is at an 11% discount to its five-year mean.
This translates to a 5.6 times EV/Ebitda for FY2027F, on strong Ebitda growth driven by YTL Power’s data centre business.
In a separate note, Kenanga expressed positive sentiment about the corporate exercise, adding that the substantial 44% discounted exercise price presents an attractive reward for shareholders.
"However, this exercise does not guarantee long-term shareholder retention, as they can exercise the warrants at any time, especially since the exercise price is set at a discount to the market price."
The research house also noted that given the warrants being unlisted is uncommon, warrant holders can only monetise them through a conversion to shares.
"To this end, we believe YTL Power’s shareholders are most likely induced into doing so early as well to mitigate pressure of EPS dilution."
Kenanga maintained its “outperform” call on the stock, but adjusted its target price to RM4.49 from RM5.00 on a fully-diluted basis.