https://www.forbes.com/sites/richkarlgaard/2024/04/21/electricity-wars/?sh=2ecd5de47abd

What changed? Two things. One was “transformer”—a new AI language model that emerged from Google Labs in 2017 and made today’s generative AI possible. Two is the sheer processing power of Nvidia’s chips. The new Blackwell chip has 208 billion transistors. Nvidia says Blackwell can support a 27 trillion parameter model, a gigantic leap in processing power from what’s available today. One of the first deployments of Blackwell will be in Malaysia, powering a supercomputer created by YTL, the Malaysian business group run by Francis Yeoh, who shares a $1.4 billion fortune with his siblings.

I state it below again for your easy reference.

Jawa Power and Jordan Power - earnings will be steady at RM120-150 million PBT a quarter
PowerSeraya - estimated at SGD180-200 million net a quarter

PowerSeraya earnings will be slightly lower than Q1-Q2 FY2024 due to lack of extra long generation gain from selling into the pool and gradual falling off more lucrative retails contracts locked in during the pandemic

@cstanmyinvest, I believe I have said here numerous times before that the USEP fluctuations have little impact on PowerSeraya earnings as over 95% of its electricity sales are locked in retails and vesting contracts. The exposure to the wholesale pool market is small, yet the extra long generation gain can be substantial when the pool prices are high as we saw in Jan-June 2023 when PowerSeraya managed to realise extra generation gain of SG$20-30m a quarter by selling into the pool at high USEP.

For better understanding of how the merchant electricity market in Singapore works, please read one of my previous posts which detailed how the market works.

YTLP power generation includes generation business in Singapore, Indonesia and Jordan. You need to assess the earnings potential of each asset. Pls read my earlier posts and comments in this forum for more info.

@estk, I do not know where in Bursa website the daily traded data is extracted from.

I got the data from Hong Leong research daily reports.

Local institutions net bought RM25 million worth of shares in YTL last Friday alone, and local retail investors were the only net sellers, being spooked by Middle East tensions.

It is a waste for local retailers to have sold off YTL shares which are still cheap at forward PER of only 12x, compared to Tenaga's 18x PER, PEtGas 25x PER, Sunway 21x PER.

Foreign funds collectively bought a total of RM24 million worth of shares in YTL Power last Friday 19 April, and local institutions bought another RM18 million worth of shares in YTL Power.

Only local retail investors sold YTL Power last Friday, being spooked by Middle East tensions and naysayers in this forum. What a waste!

@Agjl, I cannot share the full report here as i3 admin does not allow it.

If you want, just pm me in i3 messenger and I will send you the pdf file

CLSA upgraded YTL Power today to a BUY with higher target price of RM5.10. Some extracts from the research paper:

YTL Power: a proxy play to Nvidia, upgraded to BUY; we prefer it over YTL
- YTL Power, among a select few with priority to Nvidia’s latest chips, stands to gain on
the hastened rollout of capex (we estimate RM16bn). We introduce AI segment
valuations (earlier ascribed co-locator valuation), which lifts our target price to RM5.10
for YTL Power and to RM2.88 for YTL, but lower YTL’s rating from BUY to O-PF on price
action. We raise our earnings forecasts by 10-28% for YTL Power and 12-26% for YTL
over 25-26CL to account for the AI segment impact.

- Assuming a blue sky scenario, fair valuation could rise to RM6.60 for YTL Power (on a
150 MW rollout). YTL Power leveraging on Nvidia to scale shields against over-capacity
risk in non-AI datacentre demand.

@Apple888, CIMB target price for YTLP is RM4.50

CIMB analyst must be careful and responsible in her earnings projection as many local funds are buying into YTL Power now, otherwise she will go against the interests of these local funds who are clients of CIMB Investment Bank

CIMB analyst has definitely overplayed the "normalisation" of PowerSeraya earnings. She will have to upgrade YTLPower earnings projection after the company delivers another set of strong earnings in coming quarters.

@JMpower, as I wrote in my last post on YTL & YTLP, I think it will be fair to attach a PER of 20x for a well diversified conglomerate like YTL, hence a target price of RM4.00.

If YTL wins the HSR, then the upside is a lot bigger.

I think as the major shareholders are also the top management, the management style is naturally more conservative and the management is not bothered much with share price fluctuations. Unlike those companies which are run by professionals employed from outside and the CEO's remuneration is linked to the share price performance, KSL is run by the major shareholders so they are in for the long term gains of the company.

Though they are not bothered much with short term share price fluctuations, but it is always important to maintain the company share price at a healthy level, because after all the whole purpose of doing the listing is to raise money for the company, hence if the share price remains depressed, it defeats the purpose of listing.

I think it still makes sense for KSL to remain listed as the company will still need to raise fresh funds for future land acquisition or new commercial projects.

What I have proposed above will be good for the long term gains of the company as well as short term share price appreciation, so I hope the KSL management will consider them.

@Invest_888, I would like to meet the Khoo/Ku brothers/directors if they are willing to receive me. Even without doing so, I believe the KSL major shareholders and management know what to do best for the shareholders as it will be in their own interests too.

The IBs are at work pressing down the share price ahead of call warrants expiring next Friday and April end, so the share price will probably be capped til April end. Nothing much to share and write before then.

share price is under selling, and so I will stop writing anything until it stabilises.

The bear has got the upper hand for now.

If you are not comfortable with the current share price level, just sell off and move over to other counters, and not talk non sense here.

Newbies are also not advised to buy into this counter now if they are not comfortable with the strong price rally in past 1 year.

YTL Power is still very much undervalued, despite the strong rally in share price in past 1 year.

I particularly disagree with the notion by some parties that YTLP is over-valued, as they are not able to come out with any figures to show. Whatever valuation matrix you use, and whichever big cap you use to compare, YTLP is way under-valued.

If it were over-valued, the share price would have fallen to RM3.00 or below. Why after over 2 months of hitting the peak of RM4.24, the share price still could hit RM4.17 earlier this week? And the buying volume on that day was very high, estimated to be over 10 million shares that bought into the stock from RM4.05 to RM4.17. That was not the kind of volume either you or me or any retail investor could buy. Hence I suspect it was by some local funds.

I always think that i3 is a platform for us to share useful information among retail investors so that we get more clues on which stocks to buy ahead of the foreign funds and local funds.

What we write and post here does not have any impact on the share price of big caps like YTL or YTL Power, as the shares traded everyday are in tens of millions. What we buy or trade hardly moves a needle.

But for small caps like KSL or Crescendo, share price may move fast even only retail investors are trading the counters, so we must be more responsible in what we post.

Hence I find it strange for some parties trying to talk bad on YTL Power in this forum, as such effort will come to nothing. On the other hand, what I write here also will not have any impact on YTLP share price, no matter how I promote it.

What I am trying to do is just give a reasonable projection on what to come for YTL and YTL Power based on my own analysis on how earnings outlook will be and how the market may value it, hence my projection for 15x PER eventually.

It may or may not achieve that kind of valuation, as it also depends on foreign fund flows in and out of Bursa (which itself depends on a lot more other factors like US Fed interest rate cycle, ringgit movement outlook, the country fiscal positions and policy, any external black swan events etc.) and whether the company and each of its subsidiary can perform as expected.

Based on my years of following the company's management and corporate moves, I have reasons to believe that the company will do well in the near to medium term looking at the various initiatives it has undertaken. Hence I will just hold onto what I have on YTL and YTL Power without taking any profit as yet, as it is hard to find another big cap stock which has as good prospects as YTLP and YTL.

I just quote what Warren Buffet has said, he is "quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business."

I believe the prospective return on capital for YTLP is good and improving in next 2-3 years, and always believe the the management is competent in what they are doing, and think that the stock is not over-valued, so I just hold on until it rises above what I think it has become over-valued, or else I just keep them as long term dividend stocks.

As such, I would advocate for rational and responsible postings here, and for long term investments. And we should always be open to more investment ideas like PBA (which suffers a temporary setback now) and Crescendo / KSL now, though I did miss out on SP Setia at below RM1.00.

See it is absolutely possible for some of us as retail investor to beat the market and foreign / local funds, eg. we bought into YTL at RM0.52+, YTL Power at RM0.70-1.10, Crescendo at RM1.50, KSL at RM1.00-1.50 way before funds came in.

Finally, I welcome anyone who can share good info on any stock that you think will fly, so that we can all make money together.

Remember it is not a zero sum game among retail investors here, we are here to win money from funds by buying good stocks low ahead of funds and sell high to funds when they realise the deep values of the stocks we invested in.

Yes we are all here to invest and make money. Lets hope for YTL and property counters all to the moon!!

correction, YTLP bought the Kulai land at RM429 million for a size of 664 ha, so effectively at RM6.00 psf.

and the land is worth RM8.57 billion now if based on the latest land transaction between Crescendo and Microsoft Payments.

Of note is that Crescendo sold a piece of land of 23 acres in Johor to Microsoft Payments at RM120 pst, what a genius deal for Crescendo management!!

FYI, YTLP bought the 657ha Kulai land at just RM6.00 psf, which means the Kulai land has appreciated in value by 20 times in just 2 years!! It was valued at RM430m then but is now worth RM8.5 billion !!!

after the recent share price rally, valuation of property counters have gone up:

Eco World at 23x PER
SP Setia at 28x PER
Mah Sing at 15x PER
not sure about Crescendo and Plenitude which I think is less than 10x PER for smaller cap
KSL is the cheapest at 4.5x PER only

I agree that when foreign hot money is in, many counters will fly high. Right now the property sector is hot, and we are seeing counters like Crescendo, KSL, SP Setia flying high, and I am happy to see that as each of us can make some money from different counters we invest in.

When foreign funds come in and bring in money into Bursa, we retailers can make some money and local institutional funds also can take some profits off, then retailers and local institutional funds will have more money to buy other counters in Bursa.

That's my argument for local institutional funds accumulating YTL and YTL Power while both are consolidating and property counters surging high.

I am sure some of you are also taking some profit off the high flying property counters.

But I am not suggesting anyone to chase high as there are always IBs trying to press the share price down ahead of their call warrants expiry. I suggest accumulation at low for long term investment.

I am not discounting the possibility of local institutional funds approaching YTL and YTLP for a private placement of 2%-3% at a discount to market prices, or simply accumulating from the open market.

This is likely so as YTL and YTLP are becoming among the largest cap companies in Bursa and local funds are encouraged to invest more money in Malaysia by bringing back funds from overseas.

Statistics shows that local institutions have been net buyers of Bursa stocks in past 5 weeks since 1 March 2024. I suspect that some of these local funds have been accumulating YTL and YTL Power shares as they missed out both last year.

As of 30 June 2023, EPF still had at least 3.02% stakes in YTL Power and 2.58% stakes in YTL Corp. I suspect they have more now but still lower than 5%.

Both YTL and YTL Power shares are undergoing consolidation phase now, awaiting fresh catalysts for a break-up. As they have been consolidating for over 2 months, I suspect good news should be coming in next few weeks.

In terms of valuation, YTL is still cheap at 2024 forward PER of 13x (compared to 17x for Tenaga and 23x for PetGas). Earnings are expected to rise in coming quarters and coming years from:

1) Jordan Power which is running at full steam now amidst gas supply shortage in Jordan
2) Wessex Waters which may turn around as early as in Q3 FY2024 and to report bigger profit from 1st April 2024
3) data centre 1st phase with SEA Group which has been completed in Mar 2024
4) AI data centre which will complete 1st phase in early 2025
5) cement business which is seeing stable bulk cement selling prices in Jan-Mar 2024 while coal prices are under control
6) construction business which will add billions worth of contracts from AI data centre, warehouses for SEA, massive capex programmes of Wessex from 2025, prospects of HSR
7) hotels and shopping malls with full recovery of tourism activities
8) potential more asset monetisation such as injection of hotels into YTL REIT

I am not discounting the possibility that while the share price of YTL and YTLP are holding steady, local funds may approach YTL and YTL Power for a private placement of 2% to 3% stake at a discount to market prices, or are just accumulating quietly in the open market before the next good news to push it to higher level.

Statistics shows that local institutions have been net buyers of Bursa stocks in past 5 weeks since 1 March 2024. I suspect that some of these local funds have been accumulating YTL and YTL Power shares as they missed out both last year.

As of 30 June 2023, EPF still had at least 3.02% stakes in YTL Power and 2.58% stakes in YTL Corp. I suspect they have more now but still lower than 5%.

Both YTL and YTL Power shares are undergoing consolidation phase now, awaiting fresh catalysts for a break-up. As they have been consolidating for over 2 months, I suspect good news should be coming in next few weeks.

As to valuation, I mentioned before that YTL Power at RM3.80-4.00 was trading at just the fair value for PowerSeraya alone, and investors were getting all the other assets (Wessex Waters, Jordan Power, Jawa Power, Yes 5G, data centre business, digital bank etc.) for free. This still holds now.

Looking at things are moving at the other assets and data centre division, I expect investors will soon give appropriate values to each of them as each starts to contribute earnings in 2024 starting with:

1) Jordan Power which is running at full steam amidst gas supply shortage in Jordan
2) Wessex Waters which may start to turn around as early as in Q3 FY2024 and to report a bigger profit from 1st April 2024
3) data centre which has seen its first phase with SEA Group completed in March 2024
4) AI data centre division for which YTLP has secured access to Nvidia latest Blackwell GPUs

I would expect YTLP's earnings to be around 40 - 42 sen for FY2024 with slightly lower earnings contribution from PowerSeraya in 2H FY2024, which shortfall will be covered by improved earnings from Jordan and Wessex, and maiden contribution from 1st phase data centre with SEA.

For FY2025, with half year contribution from the AI data centre (with 1st phase to be completed in early 2025), YTLP net profit may jump up by about RM400 million and EPS may exceed 45 sen, then rising to 50 sen in FY2026 with full year contribution from the AI data centre.

With the larger earnings base (>RM3.0 billion a year, comparable to Tenaga, TM or PetGas) and a more diversified earnings base (ranging from utilities businesses of power generation in Singapore, Indonesia and Jordan, water & sewerage in the UK and Johor, 5G telecommunications, data centre, property development in the UK etc.), the market will attach a higher PE ratio to YTL Power. I am looking at 15x PER as a more palatable valuation (still lower than Tenaga's 18x, PetGas's 23x).

I am confident that YTLP share price will test RM6.00 (15x EPS 40 sen) in 2024 and RM6.70 in 2025 and RM7.50 in 2026.

Yes there are so many potential corporate exercises that KSL may do to enhance shareholders' values:

1) bonus issues to enlarge share cap base and to increase liquidity
2) private placements to institutional funds to raise cash for future expansion and to increase free floats
3) to issue 5-year warrants like one free warrant for every 2 mother shares held to progressively raise more money over next 5 years and to increase share cap base
4) to inject the hotels and shopping malls into a REIT which may raise easily RM800 million cash to KSL (i.e. PBT of RM120m in 2023 from commercial assets or operating cashflows of over RM130m a year, at 7% yield, the REIT would be worth RM1.86 billion)

5) declare dividends from 2024 onwards, as it has completed all major capex programmes (Klang Explanade Mall & hotels) and strong operating cashflows would enable dividend payouts of easily 30% or 12 sen a year

Share price movements everyday is hard to predict and explain, as there are too many parties with different interests.

For example, we have another call warrant expiring on 19 April, which is issued by AffinHwang. Remember Affin dumped big volumes of mother shares on 8th Mar when its another call warrant expired. The big dump volume was adsorbed and share price recovered within a week. Just beware of another potential move by the IB who may try to depress the mother share price until next Friday.

Another YTL Power's strength is that it is the only company in the region that has access to the latest Nvidia Blackwell B200 GPUs, so those cloud computing companies like Microsoft and AWS will lease out the AI data centre space at YTLP's Kulai park in order to use the powerful Blackwell B200 GPUs for their cloud computing business.

Don't get it wrong, YTL Power is not in competition with the cloud computing giants like AWS or Alibaba cloud. Its AI data centre venture in Kulai is a facility to be leased out to these cloud computing giants, capitalising on YTL's core construction expertise, abundant land, adequate water supply and solar power.

It is only natural for it to have some profit taking after a strong 2-day rally. It provides a good chance to those who missed out earlier to gain entry and for me to accumulate more at lower prices.

I think one of the reasons why KSL share price has been depressed is that the company has not declared any dividend since 2015, though it made hundreds of millions of ringgit in profits.

You see other property developers do pay out dividends consistently though the dividend yields are low at 1% to max 5%.

That's the reason why the cash balance in KSL has ballooned to over RM500 million with little debts. I think the company did not pay out dividend in 2016-2019 as it prepared to buy over the large piece of land in Klang to branch out from Johor, and to prepare necessary cash to launch the property project in Klang township (initial development costs likeland cost and infra costs might have amounted to over RM100m or so) and to build the Klang Esplanade shopping mall and hotels there.

Now with all this major capex already done and shopping mall & hotels all performing well (note that its shopping malls and hotels in JB and Klang generated about RM120 million pretax profit in 2023), I reckon that KSL may not need to preserve so much cash in the balance sheet, unless it has identified another piece of land for new projects.

I predict that KSL may be willing to declare maiden dividends in 2024 as it has excess cash and strong operating cashflows to support a dividend policy of easily 30%.

But I check the FCF method used by the AI platform and found that the projected free cashflows for KSL were much higher than I expected - RM489m in 2024 rising to RM1,600m in 2033. KSL recorded FCF of close to RM400m in 2023 if I excluded a unusually big development expenditure of RM78.3m for a piece of land.

Its FCF may double up to RM800 million a year 10 years from now, i.e. in 2033 as the company raises rental income in the shopping malls and hotels over the years and enjoys higher profit margin from new housing development in later phases in its maturing townships.

SO I would just knock off 50% from SimplyWllSt valuation, yet still getting a good valuation of RM7.59 per share, a good 320% upside from the current price.

Oh based on latest price of RM1.79, KSL is 88.2% below the fair value, which is RM1.79/11.8% = RM15.17

@pang72, SimpllyWlstreet said KSL at RM1.67 was undervalued by 89% from its fair value, meaning that it valued KSL at RM1.67/11% = RM15.18 per share

You can go check its valuation method

MR. OTB, to address your question on EBITDA margin of AI data centre, we need to look at different parties to AI data centres.

Nvidia is the designer and maker of the dominant GPUs for AI data centre, so tight now over 80% of AI data centre users like cloud computing giants (Microsoft, AWS, Google etc), AI foundation model developers (OpenAI, Mistral, Anthropic etc.) and data centre infra providers (CoreWeave, Lambda, YTL Power etc.) rely on GPU supply from Nvidia, naturally Nvidia enjoys the highest profit margin by supplying the highly-sought after GPUs and CUDA software, hence Nvidia can enjoy a super high EBITDA margin of 76% in 2023.

I am not sure of the EBITDA margin for cloud computing giants' AI data centre division, but the nature of the business is different from data centre infra providers like YTL Power, so it is not comparable.

CoreWeave has secured US$2.3 billion in debt financing led by Magnetar Capital and funds managed by Blackstone Tactical Opportunities for its planned expansion of AI data centres in the US which would cost billions to build using Nvidia GPUs. CoreWeave reported revenue of US$500m in 2023 and is expected to post revenue of US$1.5 billion in 2024. I cannot find any relevant figure to calculate CoreWeave gross margin, but can do a rough estimation. CoreWeave management was seeking a valuation of US$8.0 billion for the company, based on an EBITDA multiple of 10x (or cashflow yield of 5-7%), CoreWeave might register an EBITDA of US$800 million a year. Based on projected revenue of US$1.5b for 2024, EBITDA margin might be 53%.

This is very very rough calculation as I do not know of CoreWeave gearing and average interest costs.

This is lower than the 65% EBITDA margin assumed by CIMB analyst for YTL Power.

The operating costs for running the AI data centre for YTLP will be electricity costs, water / cooling costs and manpower costs. If YTLP later installs out sufficient solar power at Kulai, electricity costs will be a lot lower. For water costs, YTLP may get a good rate from its associate company Ranhill. All in, I expect YTLP EBITDA margin to be between 50% to 65% on best guests.

Don't talk nonsense here lah.

To fund the data centre project, it will naturally be a combination of equity and debt funding.

Just like for the 1st phase with SEA Group, for the RM1.5b capex, YTLP has already secured RM1.3b of bank loans from Maybank and the likes, with the balance RM200m to come from equity money, for which YTLP had RM9.3b of gross cash in hand as of 31 Dec 2023.

For the AI data centre ventures, the development is gradual spanning over several years. For a total investment of USD3.0b or RM20b, equity requirement will be about RM4.0b for 80% gearing, for which YTLP will have no problem with its gross cash of RM9.3b.

Debt funding will not be a big issue too as YTLP has already demonstrated successful execution with the 1st phase data centre already completed by end Mar 2023 and revenue starting to flow in from this quarter. Lenders must have been happy with the projected revenue and debt service ability of the project before they decided to lend to YTLP for this project financing.

@Mabel, this Walll Street fair value for YTLP is derived by AI using inputs from 10 analysts. If you check the methodology and data inputs to the AI, you will see that it relied on just one analyst's input for projected cashflow for 2027 to extrapolate further to 2030 and to calculate the terminal value. As this particular analyst gave a very low projected cashflow figure for 2027 (something like RM2.1b for 2027 compared to RM2.7-3.0b for 2025-2026 based on more data inputs), so the AI thought that the earnings would gradually go down over the years from 2026. This to me sounds like the narrative of some local analysts like Maybank.

Apparently this particular analyst was able to influence the valuation of YTLP by submitting a low cashflow projection figure for 2027 to Wall Street.

So just take it as a pinch of salt.

https://www.klsescreener.com/v2/news/view/1301863/%E9%93%B6%E6%B2%B3%E5%9B%BD%E9%99%85-%E6%8E%A8%E5%8A%A8%E8%82%A1%E5%B8%82%E4%B8%8A%E8%A1%8C-%E6%94%BF%E5%BA%9C%E6%96%B0%E6%94%BF%E8%AF%84%E5%88%86-a

This list shows that funds are trying to find a way to buy cheap into YTL and YTL Power, even after the good run in share price.

@PureBULL, I am not really upset nor angry with naysayers, but I just wanted to give a true picture of the financial situation of YTL Power, and it was easy to make a comparison with Tenaga who is also in the power generation business and in the Utility sector of Bursa.

One needs to make an objective judgement and assessment of each individual company, not just looking at it being a monopoly or some sort. There is no monopoly or sort in business here. Just look at the US stock market, which company can become a US$1.0 trillion company by being a monopoly? Or which company with US$1.0 trillion market cap has a monopoly business?

I also do not like to see people who have earlier bought in YTLP share to sell cheap at the current moment to these "naysayers" whose job is just to press down the share price. It would be a pity if one let go of its holding of YTLP at this moment when the share price might be about to break up soon.

To be more conservative, I will take the average USEP of SGD158/MWh in Jan-Mar2024 as the selling price of the power export to Singapore.

Potential revenue will be:

100MW x 92h x 24h x 85% x SGD158/MWh = SGD29.6m a quarter

minus cost of generation of RM37.5m a quarter, gross profit would be RM66 million a quarter or RM265 million a year, which looks more palatable with the cost of investment of RM300+m

The 100MW of electricity export to Singapore is just a test project for the larger power export of 2000-4000MW at later stages.

PowerSeraya secured this pilot project of 100MW export to Singapore, and I understand the power export has already started since early Jan 2024. For now YTL Power signed a temporary agreement with Tenaga to secure some green energy produced by Tenaga for the pilot export project until YTLP completes its own solar power plant in Peninsular Malaysia likely in Johor.

I do not know of the tariff for the 100MW pilot export project. I need to make some assumptions here in order to get a sense of the potential earnings. I don't think YTLP could make much earnings currently as it relies on Tenaga to generate the power for export to Singapore, perhaps just a small commission for PowerSeraya as the offtaker on the other side.

But once YTLP ramps up its own solar power farm in Johor, then we can expect decent earnings to be made, assuming that cost of generation for solar power here is say 20 sen/kWh (LSS3/4 winning bid at 16-22 sen/kWh) and electricity selling price to Singapore is at 10% discount to prevailing electricity tariffs there (average USEP at SGD231/MWh in Mar 24, prevailing retails contract price around SGD300/MWh) then we can calculate the gross profit at :

100MW x 92 days x 24h x 85% x SGD208-270/MWh = SGD39-50 million revenue a quarter

Cost of generation = 100MW x 92d x 24h x 85% x RM0.20/kWh = RM37.5m a quarter

So gross profit could be RM99m - RM137 million a quarter.

It may look too optimistic on the selling price (i.e. 10% discount to USEP/ prevailing retail contract price) for a pilot project, but that may well be the case as the pilot project is only for 2 years. Any developer will need to recoup the investment costs on putting new solar power farm within 2-5 years. FYI, the cost of installing 100MW solar power farm could cost RM300 million excluding land cost.

The 1st phase co-location data centre with SEA Group is about 32MW in size. I have not much info on its potential earnings but I have read a couple of analysts' reports that projected for pretax earnings of RM100 million a year from the 1st phase data centre.

I will just take it as face value for now, i.e. RM100m PBT for the 1st phase 32MW data centre with SEA Group.

The balance 16MW of co-location data centre, if secured later, will contribute about half of the earnings of the 1st phase, I guess, i.e. RM50m PBT a year for the balance 16MW data centre.

MR. OTB, I will do some best guess here on earnings projection for Wessex for next few quarters:

In Q2 FY2024 (Dec 2023), Wessex registered revenue of RM1.19b and pretax loss of RM69.5m. CIMB and some other analysts reported that Wessex secured a 11% hike in water tariffs for regulatory year starting from 1 April 2024. Hence I expect quarterly revenue to increase by 11% or RM120 million, assuming operating costs remain the same, Wessex should report a PBT of RM50 million for Q4 FY2024 (June 2024). To note that Wessex made a very high provision for index linked bonds of RM155 million in Q2 FY24. As the inflation in the UK has been coming down since Jan 24 to around 3.2% in Jan 24 and 3.1% in Feb 24, I expect the provision for index linked bonds to be smaller going forward.

My estimate is that if inflation rate in the UK remains at around 3% p.a., provisions for index linked bonds will be around GBP25-30 million a year. So for each quarter going forward, I expect provision for index linked bonds to be around GBP7 million a quarter or RM42-45m/qtr.

As such, there is a chance for Wessex to report a PBT of RM50m + (155-45)m = RM160 million for Q4 FY24, and then in each 3 quarters thereafter, i.e. Q1-Q3 FY2025 (Sep 24, Dec 24 & Mar 25).

For period starting from 1 April 2025, Wessex will enter the next 5-year regulatory period AMP8 (Apr 2025- Mar 2030). It will depend on the final determination of Ofwat, the water authority in the UK, in Nov 2024 on the approved water tariffs based on the proposed capex and opex plan submitted by Wessex.

As all water companies in the UK have submitted substantially higher capex programmes for the next 5 years in order to meet the more stringent environmental requirements, market expectation is for Ofwat to approve the capex plans substantially unchanged from what the water companies have submitted, or just taper down slightly.

As a result, the Regulatory Capital Value (RCV) of Wessex is expected to expand substantially from currently GBP4.0 billion to over GBP7.0 billion by 2030.

As the allowed return on capital is calculated by WACC x RCV, hence the operating profit of Wessex is expected to jump up substantially when the massive capex programmes get carried out and RCV expands every year.

I think I have made some guess in my earlier article on the potential earnings of Wessex for 2025-2030. I just calculate it again below:

Assuming proposed capex of GBP3.5b is approved and capex of GBP700m is spent every year and RCV will expand by GBP300m in 2024, then RCV will expand to GBP4.3b by 31 Mar 2025. Assuming a WACC of 5.0% ( it is fair as current fund rate in the UK is 5.5% and current average borrowing rate of Wessex is around 4.0%), the allowed revenue for return on capital for RY2026 (regulatory year from Apr 2025 to Mar 2026) will be:

5.0% x GBP4.3bn = GBP215 million

Total debts at Wessex will go up to around GBP3.3b by 31 Mar 2025, so interest expense will be about:
3.9% x GBP3.3bn = GBP129 million for RY2026

Assuming provision for index linked bonds stabilises at GBP25-30m a year, Wessex may report a PBT of GBP215 - 129 - 30 = GBP56-60 million OR ~RM350 million for RY2026.

Come Mar 2026, RCV will expand to GBP5.0b and debts to GBP3.75b, so allowed return on capital revenue will be:
GBP5.0 x 5.0% = GBP250 million
interest expenses will be 3.9% x GBP3.75 = GBP146m

so PBT for RY2027 may be GBP250 - 146 - 30 = GBP74-79 million or ~RM460 million.

YTL Power's debts at the subsidiaries are ring-fenced at the subsi level and have no recourse to the parent company, but it is not the case for Tenaga and many other GLCs and other companies where any default of a debt or bond will affect the credit rating of the parent company.

For YTLP, the debts at the subsi are serviced with the operating cashflows of each subsi company, and if any subsi debt were not being serviced well, the lenders could not go after the parent company.

For each subsi company, the operating cashflows are so strong that servicing respective debt is not an issue at all. For example at PowerSeraya, operating cashflows top SGD900 million a year, and it has no issue of servicing interest expenses of SGD25m a year. In fact, PowerSeraya has been paring down its debts by over SGD1.2 billion in past 2 years.

No use for a company with monopoly business if not well managed. It can go burst too if not controlling capex spent and debt mountains effectively. How much is the free cashflows of Tenaga? Effectively zero. It is using borrowed money to pay out dividends while holding onto billions of trade receivables pending collection from the government.

Just because it is a GLC and it will not fall?? Think again.

Wasn't MAS monopolising the domestic flights before Air Asia came in?
Wasn't Proton getting billions and billions of grant from the government while having almost monopoly of the entry-level cars before Perodua came in?
Wasn't BHIC monopolising the supply of war ships and combat vehicles to LTAT?
Wasn't Bernas monopolising the import of white rice?
Wasn't Hicom monopolising certain heavy industries in the country before it went burst?

Don't talk nonsense here. There is no monopoly in business here, it is just government protection.

Let me update on YTL Power cashflows and net cash situation based on latest Q2 FY2024 results:

Operating cashflows before working capital changes and capex amounted to RM2.74 billion for the 6 months ended 31 Dec 2023, annualised to RM5.5 billion. Among this, PowerSeraya will contribute over RM3.0 billion of operating cashflows a year to YTL Power, others are steady dividends from Jawa Power and Jordan Power plus shareholders' loan interest income.

Capex for the 6 months amounted to RM1.6 billion, meaning that YTLP had free cashflows of RM1.4 billion for 6 mths, annualised to RM2.8 billion a year.

As of 31 Dec 2023, YTLP had gross cash of RM9.6 billion and total borrowings of RM31.4 billion, or net debt of RM21.8 billion.

I estimate that almost all of the debts are sitting at the various subsidiary level:
Wessex - GBP3.1b or RM18.6b
PowerSeraya - SGD1.0b or RM3.5b
Jordan - USD1.5b or RM7.0b
Yes - RM1.0b
YTL Comms/data centre - RM1.3b

Total debts at subsidiaries RM31.4bn

This means that at the holding company level, YTL Power actually has zero debt. The RM9.6b gross cash at the balance sheet, the bulk of which is sitting at subsidiary level too for general working capital purposes and for future capex plans. I estimate that at the holding company level, there is a minimum of RM2.0 billion net cash that YTL Power can deploy for future M&A and new project capex.

So to some parties claiming of high debts at YTL Power, please study the balance sheet again.

Why are they not saying high debts at Tenaga?? FYI, Tenaga had total RM61 billion of debts and gross cash of RM19.3b as of 31 Dec 2023. Tenaga is required to spend a total of RM51b for normal grid capex over next 5 years to 2030 and additional RM35b for NETX related capex by 2030, so a total of RM86 billion of capex to be spent over next 5-6 years. Where is it going to get the money from? By increasing the electricity bills for everyone here? BY getting bailout grant from the government? from issuing more bonds? by getting more bank borrowings? Please think again and talk with facts and figures.