As for the volatile share price movements of YTLP in these few days, I think it is just mild profit taking after a strong rally. It needs to take a breather before the next rally, so as to give chance for some to take profit and others to buy in on weakness. Once the weak holders and short term traders are sold out, we may expect share price to continue rallying up to new highs, especially when there is a good chance for YTL and YTL Power to be included in the MSCI index right after CNY.

@Invest_888, expect more to come in coming weeks leading to the Q2 FY2024 result announcement or immediately after.

Hong Leong analyst being impartial gave a timely upgrade on YTL Power as the share price approached his earlier tp of RM3.90, and made very reasonable earnings projection for PowerSeraya, and decent valuation for data centre business.

CLSA was the first foreign research house that published a good report on YTL and YTL Power. Macquarie followed immediately with a note on YTL and YTL Power call warrants after an interview with YTLP MD.

Who will be next? On foreign research houses, UBS may be next as it has been accumulating YTL shares in the open market for its clients.

CIMB has a call warrant on YTLP expiring in end Feb and another expiring in end Mar 2024 so I don't expect it to upgrade YTLP in near term. Same for Ambank which has a call warrant expiring in end Feb. Maybank has a call warrant expiring in end May then end Aug so it may give a good upgrade post Q2 result.

Affin has a call warrant expiring in early Mar then another in mid April so I don't expect it to upgrade YTLP too much.

Kenanga has one expiring in June then August so it may likely upgrade YTLP next too.

The PAC proceedings into MLFF project will be good as it will unveil the currently lucrative deal between toll concessionaires and TouchnGo / SmartTag and how these toll concessionaires have been under-reporting the toll collections. Indirectly it will show the merits of having this MLFF project to ease traffic at tolls and to promote transparency in toll collection proceeds.

YTL is pretty much under-valued despite the recent share price rally, as seen by the fair value of RM6.20 given by SimmplyWlSt.

I am confident local analysts will upgrade YTL in coming weeks, as we saw that Hong Leong and RHB already upgraded YTL Power, also CLSA.

Macquarie note on YTL and YTL Power for its call warrants may prompt the equity research of Macquarie to upgrade both stocks in coming weeks.

UBS funds' continued buying of YTL shares speak loud of the deep values in YTL not yet seen by local analysts and local funds.

Correct @Bullstocks888.

PBA is still grossly undervalued at current prices. Though no analyst covers this stock now, the only entity that gives a fair value to PBA currently is SimmmplyWallSt that gives a fair value of RM4.17.

It used a DCF valuation method and actual data of company free cashflows extrapolated forward. It assumed FCF of RM69.53 million for FY2024, obviously it has not taken into account the recent water tariff hike from 1st Feb 2024.

Nonetheless, the valuation of RM4.17 already gives a good upside of over 80% from current share price of RM2.28, even after it used a relatively high discount rate of 9.01%.

By early next year, once this institution has the more updated financial data of PBA post water tariff hike, the fair value will get a further boost from RM4.17.

RHB analyst Sean Lim issued a good update report on YTL Power. Some comments below on his report:

1) His valuation on Wessex is about 1.1x RCV, probably on the low side

2) His valuation of SGD7.4 billion on PowerSeraya is quite good, as he acknowledged that PowerSeraya earnings will remain resilient to 2026

3) He projected net earnings of USD130 million for the first phase 100MW AI data centre on assumed capex of USD3.0 billion. I am not too sure of the figures, but a USD3b capex is within the reported RM20b total investment for the Nvidia tie-up which will involve other AI and cloud computing services other than AI data centre, so it seems reasonable to me. His assumed EBITDA margin of 60% seems good to me, but the assumed 10% IRR is on the low side to me. I would expect IRR to be typically in the mid teens.

4) His valuation of USD700 million for Java Power + Jordan Power is likely premised on just half of PPA payments from Jordan Power, as otherwise it is way too low. Java Power already contributes almost USD50 million of steady earnings contribution to YTLP every year, while Jordan Power may contribute almost USD120-150 million of earnings contribution every year on full PPA payments.

5) the valuation on WTE plant is on the low side too as he assumed only 14-16 years of contracts for the WTE and solar power plant.

https://theedgemalaysia.com/node/698685

Good to see the government launching a new round of LSS with 500MW solar power per developer. This will pave the way for bigger developers like YTL Power to participate.

Correct, there are plenty of opportunities in Bursa in coming months.

Bursa was languishing low in past 3 years as there was lack of interests from foreign funds and local funds were not buying much too (as EPF faced billions of ringgit of withdrawal in 2022-2023).

Now things are looking much better as can be seen in the strong foreign funds buying since the 1st week of 2024. We should reckon the fact that for big stocks to move, we need foreign funds participation in Bursa.

Hence, I focus on those big caps that are favoured by foreign funds such as YTL (UBS just added another 5.6m shares last week), YTL Power (foreign funds bought some 45m shares last week) and Genting (foreign funds holding is still very low, leaving rooms for higher).

Marina Bay Sands excellent Q4 results should be giving a clue on what to expect from Genting Singapore 2-3 weeks later.

Genting Singapore share price shoots past SGD1.00 again today

haha I am still in YTL YTLPower Genting and now PBA

This is the first coverage report from a foreign research house on YTL Power, this will pave the way for more foreign funds buying and prompt other foreign research houses to cover the stock. I see UBS to be the likely house to upgrade next.

Overall, I feel that this is a good report at least on initiation of coverage.

It leaves room for further upgrades in coming weeks as YTLP delivers another set of good quarterly results next month and other good news flow in.

On Jordan Power, CLSA only gives a valuation of RM3.1 billion.

Again, I think the analyst just assumed half of the PPA payment for now.

Once the arbitration case settles favourably to YTLP, I expect this valuation to double up.

On data centre business, CLSA gives a valuation of RM7.05 billion.

I am not sure how it arrives at such valuation besides just saying it assumes 18x EV/EBITDA. I don't know how much MW of data centre it has assumed.

Hong Leong analyst assumed just 150MW of data centre to arrive at a valuation of RM6.3 billion.

On Wessex, CLSA has definitely under-valued it at a valuation of just 1.03x RCV:

1.03 x 4.0b - 2.9b = 1.2 billion pounds = RM7.3 billion

This is very low as it assumes low profit contribution from Wessex after these 2 quarters of losses due to provisions for index linked bonds.

After 1st April 2024, Wessex will be able to secure another round of yearly revision to the water tariffs and I expect the earnings will see a big jump from Q4FY2024 onwards.

From 1st April 2025, Wessex will enter the next 5-year regulatory period and will have secured a big capex spent of close to 3.0 billion pounds over the 5 year period. Earnings will get a bigger jump from FY2026 to reflect the much larger RCV and potentially higher WACC to reflect the higher interest rate environment.

I will make some comments on CLSA report on YTL Power.

First on PowerSeraya, CLSA concurred with my view and Hong Leong analyst's view that Singapore electricity supply will remain tight until 2026, with reserve margin falling below the 27% threshold. With the new capacity coming in 2026, reserve margin will jump up to 31% in 2026 but drop back to below 27% by 2028 again, more or less inline with my own projections.

Hence CLSA projects for net profit of over SGD800 million for FY2024 and FY2025, then falling slightly to SGD720 million in FY2026. Net profit projections for FY2027 and beyond show a bigger drop to SGD700m in FY2027 to SGD500m by 2030. This projection has assumed that one or two of PowerSeraya's gas units will retire in next 3-4 years as it will be more than 20 years old. I think this is still sensible, but I will not be concerned too much with projections beyond 2026 as things are still fluid at the moment in terms of power demand growth and new plant-ups in Singapore. For instance, power demand growth may exceed traditional growth path due to heat wave, EV charging demand, new data centres etc. New plant from Keppel or Sembcorp may get delayed to beyond 2026 for whatever reasons. PowerSeraya may win one of the new tenders for a 600MW hydrogen ready gas-fired combined-cycle plant project to be commissioned in 2028-2030.

CLSA valuation of PowerSeraya is about SGD5.0 billion which is on the low side of Hong Leong's SGD7.3b but higher than Maybank and other local analysts of SGD4.0b.

I see further scope for upgrades from CLSA as PowerSeraya continues to deliver strong earnings or wins a new tender.

@moncmondo87, thanks for the file by CLSA

@moncmondo87, can share the link for CLSA report?

@cgtan2020, no, not based on this news link

KingKKK has his own calculations

furthermore, there will be electricity cost inbalance pass-thru built in the water tariffs, so there will be no issue of electricity tariff hike impact on PBA earnings going forward.

Another good thing is that the water tariffs will get a review every 3 years going forward, and PBA water tariff for Penang remains as one of the lowest in Peninsular Malaysia even after the water tariff hike

@cgtan2020, based on KingKKK's calculations, PBA revenue will get a lift of RM80 million a year after water tariff hike from 1st Feb 2024. Assuming operating costs remain more or less the same, pretax profit should get a lift of around RM75 million. Net profit should reach RM120 million a year or EPS of 36 sen

@Bullstock888, ya PBA could be a multi-bagger in making and the re-rating could be pretty soon.

Thanks to KingKKK for highlighting this stock last week

@MOBAjobg, I can understand why analysts tend to use conservative projections for YTLP data centre business, as so far information has been scarce.

Hong Leong analyst used the consensus valuation of Keppel DC REIT which is the closest peer available for comparison.

I would wait till the 1st phase of AI data centre to start contributing earnings in Q1 FY2025 to gauge the earnings potential of the AI data centre collaboration with Nvidia

Utilities stocks typically enjoy high PE ratio, as the business is defensive, as show below:

Tenaga 15x
PetGas 19x
Ranhill 25x
Malakoff loss making for FY2023, 12x PER on FY2024 earnings (in doubt)
Gas Malaysia 12x
Dialog 20x
YTL Power 10x

I will try to break down the sum-of-parts valuation by Hong Leong Daniel Wong:

1) PowerSeraya valued at RM25.99 billion or SGD7.4 billion
It looks like he is using a projected net profit of SGD720-740 million/year and multiply by a PER of 10x. This is okay to me as he projects a slightly lower profit (8%-10% lower) than my earlier projection of SGD800m/year, as the electricity demand growth is slower than expected in Dec due to more rain and less heat wave effect. Nonetheless, this is good valuation for PowerSeraya

2) Wessex valued at RM16.4 billion
He uses a multiple of 1.4x RCV and the latest available figures as of 31 Mar 2023, i.e. RCV of 4.0 billion pounds and net debt of 2.9 billion pounds - 1.4 x 4.0b - 2.9b = 2.7 billion pounds or RM16.2 billion. This valuation to me is fair. Wessex' RCV is expected to go up by some 10% to 4.4 billion by 31 Mar 2024, and so valuation will increase by 10% soon

3) Attarat Power valued at RM2.58 billion
He uses DCF method at 12% discount rate. Back calculations show that he may have projected annual earnings of around RM250-300 million as Nepco has been paying about half of the PPA payments. When the arbitration case settles favourably to YTLP and Nepco honors the full PPA payment, I see this valuation to double up.

4) Data centre business valued at RM6.3 billion
He uses the consensus valuation of Keppel 300MW data centre REIT, or about SGD12 million per MW. This is not too far off from the Infratil's valuation of its investment in Australia data centre business reported to be A$15 million/MW. Daniel only assumes 150MW of data centre for YTL Power so far, leaving room for more upside when YTLP secures more data centre jobs higher than 150MW. Furthermore, I would expect AI data centre to be worth much higher than the SGD12m/MW valuation for traditional data centres.

Singapore dollars and british pounds both broke up resistance of 3.50 and 6.00 respectively. If this momentum continues to end of March, we can expect a bumpy earnings contribution from PowerSeraya and Wessex Waters for the Q3 FY2024 quarter. It is timely especially when Wessex is about to turn in profits from this Q2 FY2024 onwards.

@xiaochen, don't forget about SimplyyWlSt valuation of RM4.95 for YTLP

you need to download it fast before i3 admin removes it again

http://www.hlgs.hongleong.com.my/published/article/zmZNWR0YiO5dahboexorR-ydSzgn6bhC0NaR9pxoGFzNmwjLSFWOK0t_4vPbg5XKznYjFt_jl9kVeNtolHuL9HbQkqcOM_aIMrHCfZzrv3Y1

Post removed.Why?

Hong Leong research has been chun in last 2 rounds of upgrades, 1st to RM2.90 then to RM3.90. I believe this HLIB analyst Daniel Wong will be accurate in his projections

Post removed.Why?

Hong Leong research raises target price for YTL Power to RM5.15

Great!

Good news - ERL concession will be extended by another 30 years and ticket price will be market driven. It will pave the way for ERL to turn around and generate profits for years to come

@paperplane, yes RM100 million of dividend may not be realistic. I was just saying that PBA will have the financial capability to fund the capex and pay good dividends.

I would be happy with RM50 million or 15 sen per share of dividend every year, as it would yield me 7.5% p.a. at my entry cost of RM2.00.

At current price of 2.25, it will yield 6.7%

@observatory, it is now an opportune time to invest in infrastructure assets as the high inflation environment in past 1 year has inflated the asset value of infrastructure companies like Wessex Waters, while high interest rate environment has depressed the valuation of these infra companies (eg. water companies in the UK are depressed to 1.0-1.2x RCV only compared to 1.3-1.5x RCV before COVID).

With inflation cooling off in the US and UK, and interest rate cuts are being anticipated in 2024, infrastructure company valuation looks set to expand strongly later this year.

Capital expenditure will always be there for infrastructure companies like PBA.

For the contracted capex of RM107 million as of 31 Dec 2023, PBA will have no issue of funding it as its operating cashflows will be super strong post water tariff hike.

PBA had about RM88 million of operating cashflows for the 9 months to 30 Sept 2023, annualised to RM120 million thereabout. Post water tariff hikes, it will have another RM80 million of additional revenue / cashflows a year, making it almost RM200 million of operating cashflows a year.

PBA can afford to pay out up to half of this as dividend, i.e. RM100m or 30 sen a share, with still another RM100 million to fund capex.

Assuming capex is funded 65%-67% by debts, it can fund capex of RM100m/33% = RM300 million of capex each year.

If I add back depreciation & amortisation charges and minus out lease liabilities payments, operating cashflows of PBA will increase by another RM50 million a year. So free cashflows will be likely be more than 40 sen a share, and PBA can well afford annual dividend payouts of 20-25 sen.

weak holders and short term traders in PBA are being wiped out by strong funds' buying. Good bargain to have added more at 2.35-2.32 this morning.

With expected EPS of 40 sen every year after the water tariff hikes, PBA is trading at undemanding PER of under 6.0x.

With a huge net cash position, PBA can afford to pay out handsome dividends going forward. Assuming a 50% payout ratio, we may expect dividend payouts of 20 sen per share every year, and dividend yield may exceed 8%

@cgtan2020, foreign funds' holdings in YTL Power was 12% in 2014-2017, now at 11% it is still lower than previous highs.

Now there are more assets within YTL Power than in 2014-2017, such as Jordan Power already fully commissioned, 1st phase data centre for SEA Group is about to get commissioned, 1st phase AI data centre will take off in mid 2024, digital bank will start in 2H 2024, WTE plant will start construction later this year etc. So I would expect foreign funds' holdings in YTLP to surpass previous highs.

These foreign funds are just about to give a fair value to PowerSeraya:

net profit of SGD800m/year x PER of 11 = SGD8.8 billion x 3.50 = RM30.8 billion or RM3.80 per share of YTL Power

The market still ascribes zero value to the other assets of YTL Power - Wessex Waters, Jawa Power, Jordan Power, Yes 5G, digital bank, WTE plant project, data centre business, AI data centre collaboration with Nvidia, potential RE export to Singapore etc.

should be about 45 million shares of YTLP snapped up by foreign funds last week

@cgtan2020, thanks for the data.

It shows that foreign funds continued buying into YTLPower in a big way, scooping up some 35 million shares last week.

Bursa announcement on the other hand showed that UBS continued adding shares in YTL last week, buying up over 6 million shares.

Amazing that share price of Nvidia could move up by 175 times in just 13 years.

Looks like my wild dream of YTL & YTL Power becoming a 30 bagger (from RM0.52 and RM0.70 in 2022) in 10-15 years may not look so wild!

Mr. OTB, I do share your view that when the AI data centres take off in a big way in next 2-3 years, it is highly possible for YTL Power share to reach RM6.00-7.00.

Meanwhile, one needs to brace for short term impact from the selldown of other over-valued stocks, as the holders of these other stocks may also have holdings in YTL Power. Some may need to cover their margin position.

But as said before, the risk now is certainly higher than before as YTLP share price has risen much in past few months. One should have a long term view for holding this stock if buying on dips at current prices.

A good recent example is PBA which is being re-rated after the water tariffs are revised up.

The share price jumped up by some 25% yesterday immediately after the news. Most people would not dare to chase anymore or choose to take profit. But the share price continued running up today to new high. That strong buying was by big players who knew exactly how the stock was under-valued, and the fair value still gave substantial upside to the stock at RM2.30.

Now come back to YTLP, earlier this week, we saw big buying pushing YTLP share price up to RM3.90. That kind of buying in millions of shares was most likely by foreign funds who knew exactly how much YTLP should be worth. That clearly showed to me that the fair value for YTLP is way higher than RM3.90. One indication is by SimplyyWlSt who gave a fair price of RM4.93. Foreign funds should have referred to this as one reference, besides having internal assessment on the earnings outlook of PowerSeraya, Wessex, Jordan Power and potentials of AI data centres.

well said KingKKK.

No one can predict how the share price will move tomorrow or in the short term, but over long term share price movement should reflect the intrinsic value of a stock.

There is absolutely no point in trying to guess whether YTLP share price will rebound or continue sliding down tomorrow. It may suddenly jump to RM4.00 or drop to RM3.30, who knows?

But one thing is for sure, if the company earnings continue to be strong, the share price will go up eventually to reflect the fair value, irrespective of whether the share price has risen by 300% in past few months, or the share price has dropped by 15% in past few days.

I still see good chance for YTLP to test RM4.00 in coming weeks and to beyond RM5.00 in longer term.

@myloh123, I am not sure if there is any deal at the top between Jensen Huang and YTL Power, but I do see huge potential for the AI data centre collaboration between Nvidia and YTL Power. Recent reports suggest that data centre business is going to take off in a big way in next few years in this part of Asia.

@Seasons99, thank yourself for having the patience to read my long long articles and to hold this stock until now