Daniel Wong of Hong Leong equity research has been one of the most professional and non-biased analysts so far, his effort should be applauded. I believe his equity clients are laughing all the way to the bank.

https://klse.i3investor.com/web/blog/detail/hleresearch/2024-02-05-story-h-189313588-Technical_Tracker_HLIB_Retail_Research_ndash_02_February_2024

Hong Leong analyst is very good, and consistent in his analysis and recommendation. The few lines in the article on YTL Power basically summarise the outlook for the company.

@beinvested, yes you can see how rich the premium in C48 :

RM0.15 (issue price) x 5 + RM3.50 = RM4.25 vs current price of RM3.87, i.e. a premium of 9.8%. So RHB has earned this premium when issuing C48 at 15 sen this morning, and earned a higher premium of 11.8% when retailers bought up C48 to RM0.165.

When you see the new C49 listing tomorrow, you may fall off the chair, as the premium will be RM0.15 x 8 + RM4.60 = RM5.80 vs current price of RM3.87, i.e. a premium of 50%. This shows how bullish AMbank is on YTLP share performance over next 9 months. But it is rather puzzling that Ambank target price for YTL Power is only RM5.10 or thereabout, way lower than the targeted premium price of RM5.80 implied by C49.

Maybank just issued a new call warrant C47 on YTLP and will not have any call warrant expiring until end of May 2024, so I expect Maybank to likely upgrade YTLP by end of the month.

CIMB has a call warrant expiring end of this month, so I do not expect CIMB to give any meaningful upgrade before end of Feb.

Now at least we have seen Hong Leong, RHB and Macquarie analysts concurring with my view that PowerSeraya earnings will sustain until 2026, I expect more analysts will get convinced after the Dec 2023 quarterly result is announced later this month and the rest will upgrade after the March quarterly result announcement in May 2024. The remaining who still do not upgrade have their own agenda and we wouldn't need to bother with their reports anymore.

@Agjl, yes you are right that investment banks typically rush to issue new call warrants on a stock when they think that the underlying stock will go up meaningfully in the following few months, so that they can sell the new call warrants at a high premium. Also when the underlying stock goes up or when investors also think that the mother stock will go up meaningfully then only they will buy the new call warrants at a premium.

If the investment banks have bought sufficient mother share for cover when they issue new call warrants, substantial capital will be tied up for the duration of the call warrants typically for 6 months to 9 months.

Take an example on the latest call warrant on YTL Power, C49 issued by Ambank and to be listed tomorrow. If Ambank plans to sell 80 million shares of the new call warrants C49, it will have to buy or borrow 10 million shares of YTL Power mother shares to cover the call warrants. Hence, Ambank will have to have capital of some RM38 million for the next 9 months to 30 Oct 2023 when C49 expires. RHB when issuing C48 will have to allocate capital of 100m/5 = 20m x RM3.80/share = RM76 million for 9 months.

If they don't think YTLP share will go up meaningfully (at least to the premium conversion price) within the next 9 months, then they wouldn't have issued the call warrants, as no investor will buy their call warrants if they think YTLP will not go up that much, and the investment banks' committed capital in the mother shares will be gone wasted without much gain in this batch of call warrant issuance.

We have seen the same in glove stocks in 2020 when investment banks issued lots of call warrants on TopGlove, Harta or Supermax, and indeed all glove stocks shot up at least 5x to 20x in the following 6-9 months.

But YTLPower is not like glove stocks which saw their profits plummeting after Covid-19. YTL Power will see its earnings remaining strong and growing for years to come, as it is involved in utilities sector that is defensive and new digital economic sector like AI data centre and digital bank which will provide the growth.

Utilities assets like Wessex Waters will see earnings rebounding strongly from April 2024, which no analyst has factored in. For the next 5 regulatory years, capex plans are aggressive and hence RCV will expand fast from currently 4.0 billion pounds to over 7.0 billion pounds by 2030. That is also not yet factored in by analysts. Wessex Waters concession is perpetual, so its earnings will just expand every year for the next 30, 50, 100 years and beyond.

Jordan power earnings will be recognised in full once the arbitration case is settled favourably to YTLP, and earnings will expand every year from 2024 as project financing loans are progressively paid off and interest expenses reduce accordingly. Just a rough calculation, as the USD1.6 billion of project loans get paid off progressively, interest expenses will reduce from roughly USD100 million a year to zero in say 15 years. Hence in 15 years, net profit contribution from Jordan Power to YTLPower will increase by RM210 million a year from the 16th year to 30th year, with the option of extension for another 10 years.

Local analysts are still not convinced of the sustainability of PowerSeraya's earnings, as some forecast PowerSeraya's earnings to drop by half in 2026. I have said enough of the sustainability of PS earnings, now only time will prove it right.

https://theedgemalaysia.com/node/699966

3-storey link houses fully sold. Townhouses are 80% sold according to the news article

ya all the link houses priced at RM1.38 million each have been 100% sold out. Amazing

@hng33, noted your point above.

I will need to try to find out more breakdown of the borrowings for each Genting entity.

But the anticipated interest rate cuts in the US in 2024 will benefit greatly Genting group as a whole. A lower interest rate will also make the asset value of Genting Las Vegas and New York casino asset higher and the amplifying effect is tremendous even for a 1% or 2% cut in interest rates.

For example, Ambank is issuing a new call warrant C49 on YTLP with a conversion price of RM4.60 and conversion ratio of 8 to 1. Expiry on 30 Oct 2024.

At the issue price of RM0.15 per call warrant, the indicative premium will be at 52.8%, and the mother share will need to go up to RM5.80 for the call warrant to break even at the issue price of 15 sen.

If retailers buy into the new call warrants, Ambank immediately earn a 52% premium from this batch of call warrant issuance. and they seem confident in selling out the new call warrants.

Don't need to get too excited when share price rallies up and no need to get so depressed when share price is temporarily pressed down. Especially for those who don't do trading everyday or contra plays.

Taking a breather along the way is always good for a long rally to sustain for months. The current share price correction is giving some investors a chance to take profit and regroup, and at the same time giving a second chance for others who have missed out earlier to buy into and participate the next rally of YTLP. I believe some local funds are using this correction to have the reason to buy into YTL Power now.

Also the current share price weakness is giving a chance for investment banks to buy mother shares low before they issue new call warrants on YTLP. In past 2 weeks alone, we are seeing 4 new call warrants on YTLP issued by Macquarie, Maybank, RHB and Ambank. These banks obviously see further upsides in YTLP shares in next few months as they roll out new call warrants.

@Apple888, be patient. At least the heavy selling of last 2 days seems to have abated today. It is on track to achieve a temporary bottom soon before the next rally up.

@ChloeTai, be patient. A rally will come sooner or later.

The previous rally to RM5.03 was halted by the news of related party transaction (RPT) of Genm injecting another USD100 million into Empire Resorts.

Actually to the market in general, the RPT did not bode well in the short term for Genm, but to me there is merit in that deal. Let me explain below.

Genm had about USD1.75 billion of US dollar borrowings as of 30 Sept 2023, and out of this, I estimate that USD800 million sat in Empire Resorts, and the balance USD750m in Resorts World New York City. Assuming an average interest rate of 5.5% p.a., total interest expenses at Empire Resorts amounted to USD44 million or RM206 million a year.
For 9 months ended 30 Sept 2023, Genm had a total share of losses from associates of RM170 million, the bulk of which was from Empire Resorts. You can see from above that interest expenses for the 9 months might have amounted to RM150 million. Hence Empire Resorts' operating losses for the 9 months were just about RM20 million.

Now with the USD100m injection from Genm, Empire Resorts' total borrowing can be lowered by USD100m and interest expenses can be lowered by USD5.5 million a year or RM19.3 million for 9 months.

This RPT will pave the way for a faster turnaround of Empire Resorts, as shown above. Furthermore, Empire Resort management earlier estimated that mobile sports betting could contribute USD40 million of EBITDA in 2024. So all things point to a positive turnaround of Empire Resorts in 2024.

With the latest RPT, Genm's effective shareholding in Empire Resorts will increase to 90% from 76% and hence Genm will be able to account for higher % of earnings from Empire Resorts when it is about to turn profitable.

So to me this is not a bad deal for Genm and Genting, it is just that the market's initial reaction to the RPT is negative as Empire Resorts was still loss making. But the market perception will change to positive once Empire Resorts turns around later this year.

So I need to revise my figures on interest savings above. For total borrowings of USD4.85 billion, a 1% interest rate reduction in 2024 will save interest expenses of Genting Las Vegas by USD48 million or RM228 million a year.

@hng33, Yes I check the page on segmental assets & liabilities. But these liabilities figures here do not reflect the total borrowings of the group.

As of 30 Sept 2023, Genting had a total of USD 6.6 billion of borrowings in US dollars, and zero borrowing in Singapore dollar. I know Genting Singapore has zero borrowing but net cash of some SGD3.0 billion.

Out of the USD 6.6 billion borrowings, about USD1.75 billion sat in Genm (in Resorts World New York City and Empire Resorts), so there was some USD4.85 billion (or RM22.7 billion) of borrowing at Genting Las Vegas as of 30 Sept 2023 supporting the total asset value of RM25.8 billion.

@hng33, yes Genting Las Vegas is becoming a significant earnings contributor to Genting as it is a 100%-owned subsidiary.

Genm EBITDA for Sept 2023 quarter was RM714m while Genting US & Bahamas EBITDA for Sept 2023 quarter was RM370m. Taking out minority interests, Genm contributed about RM355 million of EBITDA to Genting in Sept 2023 quarter, lower than the EBITDA contribution from Genting US. You are right there.

However, as Genting US subsidiaries are still suffering from high interest rates and higher gearing, so the net profit contribution from US Las Vegas is still not significant yet. Assuming total debts of about USD4.0 billion at Genting Las Vegas and average interest rates of 5.0% p.a., total interest expenses may amount to USD200 million a year, or USD50m or RM235m a quarter. So the EBITDA of RM370m per quarter will be knocked down to RM135m after interest expenses even before accounting for depreciation charges.

But things are looking brighter for Genting Las Vegas and New York Empire Resorts as US Fed is expected to reduce interest rates by at least 3 times in 2024. A 1% reduction in effective interest rates will reduce Genting Las Vegas' interest expenses by USD40 million and bump up profit contribution to Genting by RM188 million a year.

Genting is looking set to report another stellar quarterly result for Dec 2023.

GenS registered EBITDA of SGD350m and net profit of SGD216m for Sept 2023 quarter. If Marina Bay Sands latest quarterly result is of any indication, GenS should report higher earnings for Dec 2023 than Sept 2023. A presumed net profit of SGD220m for Dec 2023 will translate into SGD220m x 3.52 x 52.5% = RM406 million net profit contribution to Genting.

Genm reported core net profit of RM237 million for Sept 2023 quarter. To be conservative, I assume Genm to report a net profit of RM200m inline with Maybank's estimate. So Genm will contribute another RM100m of net profit contribution to Genting.

Contribution from GenS and Genm already amount to over RM500 million net profit to Genting, plus Genting Plantations, oil & gas division, power and property divisions. All in, I think it is not a big issue for Genting to achieve net profit close to RM550 million or EPS of 14 sen for Dec 2023 quarters and subsequent quarters. Full year EPS may be about 56 sen, inline with Maybank latest projection for FY2024.

Applying a historical average PER of 12x to 15x, Genting should be worth RM6.72 to RM8.40 per share just based on FY2024 earnings.

We have not yet added potential good news from TauRx and potential listing of the US assets, which should push the share price beyond RM10.

@Abcdefg123456789, many investors naturally get a little nervous when seeing the heavy selldown of YTL Power shares in these 2 days. I am not sure of any particular reason why the selldown happens, and won't bother to speculate.

I have checked and found that YTL Power fundamentals are still intact with earnings set to grow further in coming quarters. I am more of a long term investors so I won't bother much with any share price correction along the way. As long as earnings continue growing, the share price will eventually follow. Any intermittent correction is me is just noise.

For those on shorter term investment horizon, you may need to use own wisdom and trading skills to set your own short term targets for profit taking or for more accumulation.

@HumptyDumpty, yes YTLP shares do not have much insider trading. The current share price weakness is more of normal profit taking after its long rally since early January, and the news of PowerSeraya clinching a new CCGT was more of an excuse for retailers to sell on news, more so when CNY is approaching. That's my read.

To me, it is normal for investors to sell on news after the Singapore EMA's award of new CCGT to PowerSeraya and especially after YTLP share price hit a new high last week.

Brace for more profit taking this week. Fundamentals are still intact.

@aceofbursa, thanks for the link. Anyway you have already posted 99% of the content. I got the idea already. I do concur with his view that PBA is grossly undervalued, easily worth RM3.50-4.00 per share.

@aceofbursa, no I am not a paid subscriber to The Star premium online. Is it possible for you to copy and paste the content somewhere and share with us?

don't see any news, guess it is just a more meaningful correction. It has to close the gap of 3.95-4.02 formed a couple of days ago

@AceofBursa, can you pls share the article or research report on PBA from Tradeview Capital CEO?

@2Invest, you were probably right that just because YTLP tied up with Nvidia in AI data centre business, it does not make YTLP an AI company. In fact, nobody would think YTLP could become an AI company or anything close to one like Nvidia.

And you are right that YTLP is an utility company, and you probably do not know that data centre assets are becoming the next growth phase of the utility sector.

FYI, the market has not given any value yet to YTLP's AI data centre business.

At the current prices, the market is only giving a fair value to PowerSeraya (RM3.80 per share) and half of the value to Jordan Attarat Power (RM0.40 per share).

You are getting all the other assets (Wessex Waters, Yes 5G, digital bank, WTE plant project, the new 600MW hydrogen-ready CCGT of PowerSeraya, MLFF, potential RE export to Singapore etc) of YTLP for free !!!

You may want to reconsider your decision to exit this stock to avoid a bigger regret later.

But again, I do not know how much profit was contributed by Keppel's 1300MW CCGT in Singapore and how much was from its renewable energy assets. So I cannot use the figure of SGD400m for Keppel's 2H profit to calculate the same for PowerSeraya.

@cgtan2020, yes that was good profit for a 1300MW of CCGT plus other renewable energy assets of Keppel. PowerSeraya has effective 2,000MW of CCGTs in Singapore, some 50% higher than Keppel's current CCGT capacity in Singapore.

@cgtan2020, thanks for the Keppel presentation. Some comments below:

Its infrastructure segment contributed the bulk of the earnings at SGD699m for FY2023, up 135% from FY2022. Keppel has quite a big portion of renewable energy assets and only 1,300 MW of CCGT in Singapore, but the latter contributed the bulk of the infrastructure earnings as some renewable energy (i.e. wind power) assets typically generate little profits.

The new 600MW hydrogen-ready cogen plant of Keppel is under construction, 35% completed as of Dec 2023. Of note is that Keppel has secured a multi-year PPA with GlobalFoundries for 150-180MW of electricity supply per year, this means that Keppel will have 150-180MW of less electricity supply to be offered to the retails market as it has opted for a long term contract with a big industrial client.

In the presentation, Keppel said its data centre REIT was valued at SGD3.6 billion for a portfolio of 300MW data centres, this is inline with the valuation used by Hong Leong analyst to estimate the value for YTLP's 150MW data centres, i.e. SGD3.6b x 150/300 = SGD1.8b = RM6.3 billion.

@xiaochen, I would expect so. If there is no other provision or one-off impairment, I would expect YTLP net profit to beat 10 sen per share for the Dec 2023 quarter.

Keppel's excellent quarterly results for Dec 2023 quarter will give a hint on how PowerSeraya performed in the quarter. Should be as good as the Sept quarter.

To YTL Power, it is not in any hurry to grab customers for its AI data centre with cheap offers, as it will only spend big capex on purchasing Nvidia H100 GPUs only after it secures a client to take up space at its Kulai site.

The original land purchase cost is already sunk in, no big deal it was just some RM450 million which can be recouped from the initial phases of traditional data centre with SEA Group.

The other basic infrastructure has been built by associated construction company within YTL group so you can bet the construction cost is very competitive.

Hence, once YTLP secures a client for the AI data centre, we can expect the profit margin will be very good, and EBITDA margin can be as high as 60% as forecast by RHB / CLSA analysts

Of course, Singtel move will create some competition to YTL Power in getting clients for its AI data centres, but I think the pie is big enough for both players to grow big.

In any event, Singapore has limited new data centre capacity to 50MW every year, which means Singtel will have to compete with other Singapore players for this 50MW quota every year.

Yes cgtan2020. PowerSeraya would be able to earn some carbon credits too!

@ltlim74, this new development does not have impact on YTL Power. It only shows that AI data centre is the way forward, even Singtel is upgrading its old data centres to AI enabled data centre. Nvidia is so big that it won't put all eggs with YTL Power only in its data centre business in Asia, remember Nvidia boss Jensen Huang also visited Singapore last month before he met up with YTLP MD in KL.

The subsea cable is different thing, this is more of a fibre cable for internet connectivity. The subsea cable I mentioned above was for power transmission from Sarawak to Singapore.

@cgtan2020, it is best explained using an example.

Say at current market prices of LNG and Singapore electricity prices of SGD 200/MWh, the fuel cost portion is about SGD140/MWh and hence the non-fuel margin is SGD60/MWh. This non-fuel margin is the gross profit margin of PowerSeraya for power generation after deducting the fuel costs.

Say at current liquid hydrogen prices, the fuel cost of CCGT generation is SGD180/MWh, so at electricity price of SGD200/MWh, the non-fuel margin for a CCGT using 100% hydrogen will be just SGD20/MWh.

However, the situation will change when crude oil and LNG prices shoot up. Let say LNG prices shoot up by 20%, so fuel cost for a CCGT burning 100% LNG will increase to SGD140/MWh x 1.20 = SGD168/MWh, so typically gencos will increase electricity selling price by the same amount to SGD228/MWh in order to preserve a gross margin of SGD60/MWh.

Now if a CCGT switches to 100% hydrogen burning, its fuel cost remains at SGD180/MWh, but the gross margin will double up to SGD48/MWh at the new electricity selling price of SGD228/MWh.

What if the hydrogen price gets cheaper with the bigger production from Sarawak? Let say if hydrogen price gets 10% cheaper, then the fuel cost for CCGT buring 100% hydrogen will reduce to SGD162/MWh, then its gross margin will get a lift of SGD18/MWh to SGD66/MWh or tripling up from the original SGD20/MWh.

Hope this explains.

Calvin, you are wrong on this. This is potentially good news to YTL Power on two fronts:

1) Firstly, Sarawak will be one of the places for the cheapest production of green hydrogen. As the state ramps up investments in green hydrogen production, it may be just in time for PowerSeraya's new 600MW hydrogen-ready CCGT to use such low-cost green hydrogen by from 2030. As explained, when crude oil and LNG prices are high, PowerSeraya will have a choice to co-mingle higher portion of green hydrogen with LNG to generate electricity at lower costs and enjoy higher gross margin.

2) The news says Singapore would fund the undersea power cable from Sarawak to Singapore for RE export from 2032. This development may be faster than for Tenaga to build a new 1,000MW inter-connection with Singapore from Johor, as Tenaga is cash tight. So this will promote faster RE export from Sarawak to Singapore than from Peninsular to Singapore (which Tenaga is trying to play it to its advantage), and there is less politics involved in such a deal, more based on merits so YTLP would stand a bigger chance to secure part of such RE export from Sarawak.

Hyflux failed due to its inexperience in power generation as it branched out from its water treatment business. Its power plant in Singapore has since been bought over by PowerSeraya at a cost lower than the original building costs of Hyflux. That shows the brilliance of YTL Power management in scooping up quality assets at a bargain price.

This new CCGT plant of Hyflux has been contributing good profits to PowerSeraya since the completion of acquisition last year, and PowerSeraya is on track to recoup the investment cost in Hyflux asset within 3 years.

Thank you Calvin for highlighting this timely acquisition by YTL group.

@Raymond Tiruchelvam, that is just a ballpark valuation using 10x PER.

It is very subjective as to how much PER to use for a certain stock. Generally investors give high PER to stocks with defensive earnings and steady dividends but little growth, such as Nestle and Dutch Lady with PER of over 30x and dividend yield around 3%.

Investors also give high PER to high growth stocks like tech stocks, some of which enjoy PER of 25x to 30x, as they think a 20% growth in earnings p.a. will lower the PER to 20x then 16x in 2 years.

Long term PE ratio band for S&P500 stocks in the US is around 15x.

If YTLP last quarterly earnings can sustain for the next 3 quarters, full year EPS will be 41.88 sen as per your calculation above. To give a 10x PER to YTLP is on the conservative side, as its earnings have grown by triple digit and are set to grow by double digits in next few years. It should enjoy a PER of 15x or more. Its peers Tenaga is trading at 17x to 18x PER, Malakoff is loss making in past 1-2 years.

The issue is that most local analysts have missed out on this stock last year and hence are catching up with upgrades, but most think that YTLP earnings have peaked, as can be seen in their earnings projections dropping from RM2.8b in FY2024 to RM2.5-2.6b in FY2025 then to RM2.3-2.5b in FY2026 then worse to RM2.1-2.2b in FY2027. When investors see the reducing earnings projection, they may not want to give a high PER to YTLP. That's the trick used by analysts to lower a target price for a stock, another trick is to use sum-of-parts valuation rather than PER. For example, Maybank still has a target price of RM2.70 for YTL Power even though it forecast EPS of 38 sen for FY2024, effectively giving a PER of just 7.1x. How would you justify that?

But I think once PowerSeraya beats their earnings estimate every quarter by quarter, eventually these local analysts will get convinced that the earnings will sustain well into 2026 and YTL Power overall profits will grow from FY2024 to FY2026 instead of reducing, then investors will be willing to give a higher PER of 12x to 15x.

Another factor is market sentiment. If foreign funds continue pouring in on political stability, and especially if YTL and YTL Power both are included in MSCI on 13 Feb, then we can see more foreign funds buying in and these funds have their own research team or rely more on foreign research house reports like from CLSA or Macquarie, rather than looking at any of these local analysts' report, then the market will give a higher PER of 12.5x to YTLP.

And foreign funds are quick in response to any news development, as can be seen today price actions where over 50 million shares were traded and stock price closed high, indicating foreign funds buying. This was good response to the news of PowerSeraya clinching a new 600MW hydrogen-ready CCGT project. You see none of the local analysts commented on this news, as they are either not able to make any sensible earnings projection for the new unit or have other agenda.

So far, only Hong Leong's Daniel Wong and RHB Sean Lim have given non-biased reports on YTL Power, who gave reasonable assumptions to justify their valuation method. The rest are mostly conflicted, I feel.

If such sentiment persists, even thought YTLP continues to grow profits year in year out to 58 sen or 75 sen per share, I am afraid the market and these local analysts will be willing to give a 10x PER only. If we are lucky, we may see it trading up to 12.5x PER. Anything above is jackpot to me.

@kytan, good for you winning on two fronts!!

I also adopt similar strategy as yours, bought some call warrants and will progressively sell off the call warrants towards the expiry date and hold onto mother shares for dividends and long term capital appreciation

@Permutation, it is difficult to pitch a target price for the next 12 months as things are happening fast on the ground. I will just try to forecast how YTLP earnings may look like in next 12-36 months when most of the new projects will have started operational.

PowerSeraya earnings should continue to be strong till 2026 at least with net profit in the range of SGD700 - 900 million a year or RM2.5b - RM3.1b.

Wessex shall turn around from FY2025 onwards with expected earnings of 4.5b x 3% = 135 million pounds minus some 35m pounds as provision for index linked bonds, hence net profit may come to around 100 million pounds or RM600 million. For FY2026, net profit will get a bigger jump as Wessex will enter the next 5-year regulatory period with a bigger capex plan and hopefully higher WACC to reflect the higher interest rate environment, hence I made a rough forecast as 5.0b x 3.3% = 165m - 35m (for ILBs) = 130 million pounds or RM780 million. Then every year thereafter, net profit will get bigger by RM100 million to reflect the bigger RCV each year. So it may well make a net profit of RM1.0 billion by FY2028.

Jordan power once its arbitration case is settled will contribute net profit of RM500-600 million a year for the next 30 + 10 years, increasing over time as project loan gets gradually pared down and interest expenses come down to zero in 12-15 years.

Yes 5G should break even in FY2024 and contribute some earnings, earlier estimated to be RM100-200 million a year on conservative subscribers projection.

Digital bank will start in 2H 2024 and hopefully break even in 3 years.

Data centre earnings contribution is rather hard to predict as not much info is available. I will just rely on RHB analyst's projection but tag a higher IRR of 15%, so forecast a net profit of USD150-180 million a year once the full 100MW AI data centre is fully developed. That will be RM700 - 850 million of net profit contribution a year.

WTE project may contribute profits of RM300-400 million a year for a capex of RM4.5 billion at IRR of mid teens.

This new 600MW hydrogen-ready CCGT at PowerSeraya will contribute gross margin of at least SGD200 million a year from 2028.

We can expect YTLPower net profit to range from RM4.7 billion to RM6.1 billion a year once all these projects start operational in next 3 years and will jump by another SGD200m or RM700m once PowerSeraya's new 600MW hydrogen-ready CCGT kicks in from 2028.

That is EPS of 58 sen to 75 sen jumping to 83 sen from 2028.

Applying a PER of 10x to the lowest earnings projection, I get a fair value of RM5.80.

Applying the past-years average PER of 12.5x, I get a top range of 12.5x RM0.75 = RM9.30.

As each project is commissioned and new earnings stream kicks in, YTLP will get re-rated gradually to RM5.80 - RM9.30 over next 12-36 months, I hope.

@cgtan2020, I think a private placement with free warrants or just issuance of free warrants to YTLP holders is likely. It will be an easy avenue to raise cash to fund the company capex over next 5 years as more warrant holders convert into mother shares.

The advantage that YTL Power has over other data centre players is that it has tied up with Nvidia and has access to its H100 GPUs which are in high demand in the market. Not all data centre players can get big amount of GPU chips to power their data centre.

@jeffchan1901, many parties are looking to venture into data centre business as this is the growth sector to get into in next few years. I think the demand for new data centres in the region over next few years is big enough to accommodate new players like TM. Don't forget some players will get out when the asset matures, just like TimeDotCom sold off its stakes in a data centre company last year.

Some comments on the latest Ambank upgrade report:

1) A lot of focus is put on YTLP's data centre business, notably a very good valuation of RM8.2b to RM10.6b for 35MW of AI data centre. Huey Ling justified the valuation by referring to the current valuation of an equivalent 70MW data centre of CoreWeave in the US (and attaching a 50% discount) and the market value of the number of Nvidia H100 GPUs required for a 35MW AI data centre. I am not expert on this but I did check online last month that a Nvidia GPU could cost RM200k a piece, and Huey Ling did assume about the same cost. The good thing is that this is the valuation for just 35MW of AI data centre, as YTLP secures more data centre jobs to fill up its 500MW data centre park in Kulai, the total valuation for YTLP data centre business may triple or quadrable.

2) PowerSeraya is valued at just SGD5.5 billion, on the low side to me. I see that her earnings projection for YTLP also comes down in FY2025 and FY2026, indicating that she was still looking at some sort of "normalisation" in PowerSeraya earnings after FY2024. This is okay to me, and it leaves room for further upgrade when PowerSeraya handsomely beats the forecast next year.

3) Wessex is valued at 1.23x RCV, better than that from RHB (1.03x RCV) but lower than Hong Leong's 1.4x RCV. She was on the conservative side as Wessex earnings have not picked up yet. It may take some time probably another month or 2 when Wessex announces the next round of water tariff hike for the year starting 1st April 2024, then I think the market will give higher value to Wessex when they see the earnings rebound

4) Jordan Attarat Power is valued at just USD283 million, way lower than others' estimates. This is even lower than a typical valuation even assuming half the PPA payments. This looks like more of the cost of investment, a little too conservative.

5) Jawa Power, Yes, Ranhill stakes are valued at net asset value, and are relatively smaller so no comment here

@sypher @cgtan2020 thanks for the pdf files!

Can anyone share the pdf file of Ambank upgrade report on YTLP?

The current effective capacity (i.e. the efficient gas-fired power plants) of PowerSeraya is about 2,000MW. Hence this new 600MW hydrogen-ready CCGT unit will increase effective capacity of PowerSeraya by 30%.

Rough calculations show that this new 600MW unit alone may add gross profit of at least SGD200 million a year to PowerSeraya once operational from end 2027. It is initially ready for 30% mix with hydrogen, and may be expanded to 100% hydrogen in the future when green hydrogen cost becomes cheaper than natural gas cost. Then gross profit might double or triple up when crude oil and LNG prices are high.

Please refer to my article below for more details and the table on electricity supply demand projection for Singapore

https://klse.i3investor.com/web/blog/detail/dragon328/2023-11-23-story-h-214219881-YTL_YTL_Power_Multiple_Growth_Engines_Firing_up

As per what I wrote in Nov 2023 (extracts below), Singapore electricity supply will be tight well into 2030. The speed of EMA awarding this RFP (within 4 weeks of RFP submission close in end Dec 2023) tells of the urgency of having new capacity on stream.


Next in 2026, a new 600MW cogen plant by Keppel is expected to commence operations followed by another 600MW cogen plant by Sembcorp. These will hardly be enough to cater to the projected peak demand growth from 8,100MW in June 2023 to 9,493MW in June 2026 (based on EMA projection). The power system reserve margin is projected to drop to sub-30% levels for the next 10 years from FY2024 to FY2033 as shown in the table below:




The peak demand figures above are all based on EMA projection. Total generating capacity is gross capacity figure (before allowing for plant internal consumption and spinning reserves). The projected new generating capacity addition is assumed to be:

· 680MW OCGTs by EMA in 2025

· 600MW cogen by Keppel in 1H 2026

· 600MW cogen by Sembcorp in 2H 2026

· 600MW 1st CCGT under EMA RFP in 2028

Really great news for YTL Power!!

That's why I said earlier that foreign funds knew something we didn't, now at least there is this good news coming