KUALA LUMPUR (Jan 27): Selling pressure on YTL Corporation Bhd (KL:YTL) and its subsidiary YTL Power International Bhd (KL:YTLPOWR) persists, pulling the two stocks to two-month lows.
Since its close of RM4.05 last Thursday (Jan 23) — when the bonus issue was announced — YTL Power shed more than 16%. YTL Corp, meanwhile, lost more than 15%.
As of 11am, YTL Corp fell over 5% to RM2.01, valuing the group at more than RM22 billion, while YTL Power was down more than 6% to RM3.39, translating into a market capitalisation of about RM28 billion.
Both YTL Corp and YTL Power are on the most actively traded list. Some 29.6 million YTL Corp shares changed hands, making it the third most traded counter on Monday morning. Meanwhile, roughly 24.96 million YTL Power shares were traded; it is currently the fifth most active counter, in terms of volume. In fact, YTL Power topped the turnover list in the morning, with close to RM87 million worth of shares transacted before the noon break.
The selldown started after the two companies’ announcement on a proposed bonus issue of warrants to raise multi-billion ringgit in fresh capital over three years.
Notably, both YTL Corp and YTL Power have had a strong rally last year. Some quarters view that some institutional investors are taking profits amid the proposed bonus of warrants.
The large volume of warrant conversions would create share overhang in the coming three years, which is likely to cap both share prices. Furthermore, the warrants will be non-tradable, meaning the derivatives do not carry any value, said analysts, and investors cannot sell them on the open market for profit.
The warrant price of RM2.45 per share is 95 sen or a 27.94% discount from YTL Power’s current share price of RM3.40. Meanwhile, YTL Corp’s warrant price of RM1.50 is 51 sen or a 25.37% discount from its current share price of RM2.01. Both YTL Power and YTL Corp have declined over 20% year to date, and more than 14% in the past one year.
According to Bloomberg consensus, the average 12-month target price (TP) stands at RM5.32 for YTL Power, suggesting a potential upside of 58.3% from its current price. YTL Corp’s average 12-month TP stands at RM3.47, with a potential upside of 73.5% from its current price.
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.
CIMB Securities, in a note last Friday (Jan 24), said it does not expect the selldown reaction to be “as bad”, given that investors do not need to immediately fork out cash.
“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,” it said.
Kenanga, on the the hand, noted that given the unlisted warrants are “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 as to mitigate pressure of EPS (earnings per share) dilution,” it said.
Read also:
No lucky escape for Bursa AI proxies from DeepSeek-triggered selldown
NationGate hits three-month low as investors weigh China’s AI push
YTL Corp, YTL Power shares down in active trade after plan to issue non-tradeable warrants
YTL Corp, YTL Power plan free non-tradeable warrants; exercise prices at discount to market prices