August 28, 2023 - PETALING JAYA: Analysts remain bullish on YTL Power International Bhd’s earnings outlook for financial year 2024 (FY24) with the group expected to benefit from its power division, namely, the PowerSeraya and Tuaspring plants and other ventures.
Hong Leong Investment Bank (HLIB) Research remains positive on YTL Power’s prospects despite the drop in the Uniform Singapore Energy Price (Usep) in July, as it noted PowerSeraya’s exposure towards Usep was slightly below 10% of the subsidiary revenue.
The majority of PowerSeraya’s earnings is driven by the healthy margins from the retail market segment in Singapore, it noted.
HLIB Research expects YTL Power to benefit from the recent full commissioning of the Attarat Power facility in Jordan through maintenance income, shareholder interest income and share associate earnings.
RHB Research, meanwhile, stated YTL Power’s full-year contributions from its 45%-owned shale oil plant in Jordan will lead its joint venture and associate profit to be stronger for the consequent year.
“While operating results will still be affected by accounting additional finance costs from index-linked bonds, which has no cash impact, Wessex Water numbers should improve as the tariff rose by an average 9%, effective April 2023,” noted RHB Research.
HLIB Research said the UK based Wessex Water’s performance remained disappointing and YTL Power expects minimal contribution from Wessex in FY24 due to the high energy cost base.
The research house added the utility group is actively exploring opportunities in renewable energy and electric vehicles, following the National Energy Transition Roadmap policy.
YTL Power is also exploring more land for the development of large-scale solar as well as waste-to-energy facilities.
HLIB Research said YTL Power’s telecommunications services, Yes, will continue to improve with 5G offerings and from ongoing project contributions.
“The data centre of 48 megawatt (MW), of which 32MW is undertaken by Sea Ltd, is guided to provide RM100mil profit before tax when fully commissioned in the stage over four years,” noted HLIB Research.
According to RHB Research, the 48MW load hyperscale data centre in Kulai, Johor, is expected to be in service by the first quarter of calendar year 2024.
YTL Power also confirmed it is a co-developer with KDEB Waste Management Sdn Bhd of a proposed 2400 tonnes per day waste-to-energy plant in Selangor, with a gross generating capacity of 58MW.
“The timeline remains uncertain as the project is still undergoing the environment impact assessment and social impact assessment procedures,” RHB Research noted.
YTL Power recorded a revenue of RM7.1bil and more than doubled its net profit to RM1.1bil or an earnings per share of 13.95 sen per share in its fourth quarter ended June 30, 2023.
For the full FY23, YTL Power posted a revenue of RM21.9bil and net profit of RM2.02bil or an earnings per share of 24.96 sen.
YTL Power’s net profit for FY23 was above HLIB Research’s expectations by 151.2% and 153.3% above consensus’s and was aided mainly by its power division.
YTL Power declared a second interim dividend of 3.5 sen per share, bringing the total dividend for FY23 to six sen per share.
HLIB Research has maintained a “buy” call on YTL Power with a higher target price (TP) of RM2.90 per share after adjusting its earnings for FY24 and FY25 by 31.2% and 80.2% respectively to account for higher revenue and improved margins.
RHB Research reiterated a “buy” call on the group with a raised TP of RM2.21 per share, after raising its FY24 to FY26 earnings estimates for YTL Power by 10% to 11%, after imputing better contributions from the power generation division.
