@Zhuge-Liang, very roughly my projections are as follow. By FY2024, I am projecting for:

1) PowerSeraya to report similar level of PBT of around RM800 million to RM1.0 billion a quarter
2) Wessex to report normalised PBT of RM130-170 million per quarter
3) 1st phase green data centre to contribute PBT of RM10-15 million per quarter, subsequent phases to contribute PBT of RM50-75m a quarter from FY2025
4) digital bank business to contribute PBT of around RM10-20 million per quarter
5) Jordan power is fully commissioned by then and contribute PBT of RM50 million per quarter

SO if we add up the above, PBT will top RM1,050 - 1,200 million per quarter, annualised to RM4.0 billion to RM4.8 billion a year.

After tax profit may be around RM3.0 billion to RM3.6 billion resulting in EPS of 35 sen to 45 sen.

Cashflows will be around RM4.0 billion a year or 50 sen per share, supporting dividend payouts of minimum 25 sen.

So at 5% dividend yield, YTLP should trade to RM5.00 per share, or at PER of 11x to 15x.

@Alwinb, I have suggested once for PowerSeraya to consider retrofitting some of its gas turbines to be able to burn green hydrogen which may be produced in Malaysia in the future, as I noticed that Keppel had already announced to go ahead with its new hydrogen-powered turbine to come in around 1H2026.

I hope PowerSeraya does look into such a possibility to see if it will be feasible to do so.

@cktay, the current government is keen to revive the HSR as this is the rationale thing to do to super charge the economy as huge construction work will flow through to various other industries. But the problem is no money. Here is where private companies with big balance sheets like YTL and Gamuda come in and bring in technical and funding partners from China or Japan.

But the sentiment is now spoiled by the coming 6 states election and threats of the green wave and Bersatu coming back to power. Dindin was the one who terminated the earlier HSR agreement with Singapore and paid out the compensation.

It looks to me that someones may have bet on a "good news" on HSR yesterday but it didn't come out last night, so these someones cut their positions on YTL and Gamuda.

It is good to see healthy correction in YTL share price today, so that it flushes out short term traders and weak holders. The next rally will be able to sustain longer after these short term traders are out.

We are in for the long term earnings growth and sustainable strong cashflows that will support dividend payouts of 10 sen or higher for many years to come, so a little noise along the way is a good chance to add more.

I will not debate further with you on PM as this is a stock I will not invest in at current share price level. You may find some comfort from fellow investors in PM stream of commentary. But here, we are all for YTL.

Don't get me wrong. I do think PM is a great company and the boss is visionary.

But the point of discussion here is whether the stock price will have chance of going higher. The stock market is future looking, if the earnings of the company do not grow the stock price will not rise.

If earnings drop, the market is ruthless in punishing the company by dumping the shares. Just like what happened to YTL in past few years when earnings were depressed. Now outlook of YTL earnings is looking bright and I am confident share price will rebound.

But the same thing cannot be said of PM. Based on RHB report on PM, the analyst said PM drop in earnings was due to weakening prices of aluminium to RM2200/tonne from recent peak of over RM2400/t. Nobody can tell you whether aluminium prices will go back up to RM2400+ or go down further towards RM2000. In the latter case, you will find PM share prices dropping another 20% or more from current level.

If aluminium prices drop back to RM1800 or below where it came up from few years ago, then it won't be a surprise to see PM share price dropping back to RM2.00 level where it came up from.

@yong1985cm, you still don't get the point.

Press Metal may have been a growth stock in past few years due to its production expansion and rise in aluminium prices. But plant expansion may have come to an end, as I have not heard any expansion plan from PM management for near future.

Now come to the revenue growth, PM revenue is entirely tied to global aluminium prices which the company has absolutely no control over, as it is a commodity, no matter how capable the management is. You have no idea how global aluminium prices are going to move in next few months or next few years, not even the company management or the boss himself. They cannot promise you on any revenue growth or earnings growth if aluminium prices do not go up. Nobody can guarantee or promise you any growth, you can stick to your own conviction but there is nothing else you can do about it.

The latest 30+% drop in earnings of PM latest quarterly result already gave you a warning, if you still do not wake up, nobody can help you.

Go check out latest research reports from all the analysts and you will see what I mean.

EPF sold 10m shares of YTLP last Friday when total volume traded on that day was 40m. Now EPF is left with just 5.03% stake in YTLP, soon will cease to be a substantial shareholder. I estimate that EPF's stake in YTL Corp has reduced to probably just 1% or lower after relentless selling in past few weeks. It has made a mistake in selling YTL too early, now making another mistake in selling YTLP.

Whatever it is selling has been morked up by a bigger foreign fund, looking at the last minute buy volume of over 5 million just now that pushed YTLP to close at day high of 1.36.

Soon when EPF is left with 1% or so stake in YTLP, we will see the share price of YTLP jumping as fiercely as YTL shares now.

Q3 core net profit is 18% higher than last year. Prospective PER only at 7.0x. Prospective dividend yield at 13.88% based on CIMB projection

Good chance to accumulate this quality retails stock

That is based on my own calculations assuming a low teen project IRR for the green data centre project

Due to heat wave and current tight supply market, PowerSeraya will make strong profit for this Q4 quarter. I will be very happy if it can maintain the gross profit margin as in Q3, i.e. a Profit Before Tax of S$230 million a quarter.

As for green data centre, it is a volume game. As the capex requirement is huge at RM1.5 bn for just the 1st phase of 48MW, so you would imagine equity cashflows may be sizable at about RM50 m in first 10 years then jump to RM200 million a year after the debt is fully repaid.

That will be almost RM9.0 billion of cash dividends coming in for next 30 years, and RM4 billion more if project gets extended for another 10 years. That's not bad an investment at all for an equity investment of US$180 million in the project.

@Muyutin, that's the idea I like about YTL & YTLPower. Once a utility asset is added to their portfolio, you can rest assured that additional cashflows will come in for next 20-30 years or more as long as YTL continue holding onto the asset like Wessex Waters which can be held for as long as they want.

By the way, the concession period for the Jordan power project is 30 years plus an option to extend for another 10 years. When the 2 power units achieve full commercial operations, the project will generate free cashflows of close to US$100 million every year for first 15 years, thereafter free cashflows will jump to US$200 million a year after the project financing debts are fully repaid, based on a project IRR of 10% as I assume.

For YTLPower that has a 45% stake in the Jordan project, it will receive about RM200 million of dividends from the project every year for the next 15 years, thereafter it will receive RM400 million of dividends every year for another 15 years + 10 years if extended

I see a similar share price trend in YTL and YTLP now as the price trend of PMetal in May 2020 when PMetal announced a big jump in earnings that surprised the market then.

PM share price jumped 10%-20% in a week after the first result surprise then went on a non-stop rally from RM2.00 in May 2020 all the way to RM6.00 in Jan 2022.

YTL businesses were affected by COvid pandemic especially the hotel and shopping mall division, but this is almost over.

Its cement business is like PMetal's commodity business, as it depends on bulk cement selling prices in Malaysia. The difference is that MCement controls almost 66% of market share in Malaysia but PM contributes how much % in global aluminium production??

YTL businesses are growing fast from this year, especially the utilities division powered by YTLPower and hotel/REITs having strong rebounds from Covid pandemic.

The earnings growth visibility is the strongest for next 3 years, but the same cannot be said for PM. If aluminium prices drop 10% later this year, you will see PM earnings to drop by 30% or more, growth company?? PMetal latest quarterly result is already a warning to you as an investor, just like Q2 last year results were a warning to plantation stock investors.

@yong1985cm, yes you are right that Press Metal earnings were resilient during COVID time and jumped up as it ramped up production capacity. But its capacity increase may have come to an end, furthermore aluminium prices may soften from current levels which are at multi-year high. It is a commodity-based business, its topline and bottomline depends entirely on the commodity pricing which it has no control over.

Just take a look at the plantation companies. They were making record profits last year as CPO prices hit over RM7000 per tonne but many now are making tiny profits after CPO prices tumble.

apologies, the timing should be like:

YTL Power should rise from current RM1.30 in May 2023 to RM5.00 level by Mar 2025.

The timing of Mar 2025 should be right as by then:
1) PowerSeraya should continue to report strong earnings due to tight supply (Keppel new plant only comes in 1H 2026)
2) Wessex will have its new water tariffs adjusted up substantially for the new 5-year regulatory period due to its enlarged RAB and to compensate the high interest rates it is suffering these 2 years from a higher WACC
3) 1st phase green data centre should have been up and running contribution new earnings stream
4) digital bank business should find its footing after 1 year of operations
5) more visibility in power export timeline to Singapore

0 seconds ago

apologies, the timing should be like:

YTL Power should rise from current RM1.30 in May 2023 to RM5.00 level by Mar 2025.

The timing of Mar 2025 should be right as by then:
1) PowerSeraya should continue to report strong earnings due to tight supply (Keppel new plant only comes in 1H 2026)
2) Wessex will have its new water tariffs adjusted up substantially for the new 5-year regulatory period due to its enlarged RAB and to compensate the high interest rates it is suffering these 2 years from a higher WACC
3) 1st phase green data centre should have been up and running contribution new earnings stream
4) digital bank business should find its footing after 1 year of operations
5) more visibility in power export timeline to Singapore

Haha pang72, I got some at 0.895 this morning. It was such a good chance to add more.

What a waste of a little bit delay and miss the buying of 89.5c...

Rebound immediately to 92.5c...shit

1 hour ago

PMetal has taken some 20 months to rise 3x from RM2.00 in May 2020 to RM6.00 in Jan 2022 and peak at RM7.00 in Mar 2022.

Expect YTLPower to follow suit to rise 3x from current RM1.30 in May 2022 to RM5.00 level by Mar 2024.

15 minutes ago

A simple comparison of Press Metal vs YTL Power:

PMetal YTLPower
No of shares 8.24 bn 8.16 bn
Market cap RM38.8 bn RM10.5 bn
Latest Q net profit RM275 m RM520 m
EPS last Q 3.34 sen 6.37 sen
Annualised EPS 13.4 sen 25.5 sen
PER 35.1x 5.1x

If the market can give a valuation of 35x PER to PMetal which has a commodity-based business, then it is highly possible for the market to eventually give a valuation of 20x PER to YTLPower which has recession-proof utilities business.

YTLPower should gradually trade up to RM5.20 per share at PER of 20x and market cap of RM40 billion to catch up with the current market cap of PMetal

21 minutes ago

Yes Pinky, QL is another stock with high valuation.

Pls see my comparison of PMetal vs YTLP in the commentary of YTLPower

YTL is a big cap with 11bn shares base, so for a foreign fund to accumulate 5% stake, it needs to buy over 550 million shares from the open market.

Even when YTL daily trading volume has been about 70m to 110m in past few days, I suspect it is still a long way to go before any fund can accumulate 5% and make bursa announcement as a new substantial shareholder

You cannot rely on local funds who are always laggards in picking good stocks. Just like most local analysts still give low valuation to YTL and YTLPower (both trading at PER of 5x) but continue to give super high valuation of 35x PER to stocks like Press Metal, Petronas Gas or Nestle

should be strong buying from foreign funds

breaks 0.95!

PMetal has taken some 20 months to rise 3x from RM2.00 in May 2020 to RM6.00 in Jan 2022 and peak at RM7.00 in Mar 2022.

Expect YTLPower to follow suit to rise 3x from current RM1.30 in May 2022 to RM5.00 level by Mar 2024.

A simple comparison of Press Metal vs YTL Power:

PMetal YTLPower
No of shares 8.24 bn 8.16 bn
Market cap RM38.8 bn RM10.5 bn
Latest Q net profit RM275 m RM520 m
EPS last Q 3.34 sen 6.37 sen
Annualised EPS 13.4 sen 25.5 sen
PER 35.1x 5.1x

If the market can give a valuation of 35x PER to PMetal which has a commodity-based business, then it is highly possible for the market to eventually give a valuation of 20x PER to YTLPower which has recession-proof utilities business.

YTLPower should gradually trade up to RM5.20 per share at PER of 20x and market cap of RM40 billion to catch up with the current market cap of PMetal

ya the current heat wave in Singapore will push up electricity consumption. As I mentioned in the article, it is not surprising for the generation gross margin to sustain at S$60 - 80/MWh during tight supply period, like it was the case during 2009-2013.

But I do hope PowerSeraya can sustain the gross margin of S$80/MWh achieved in Q3. There will be a gross profit impact of S$30-60m if generation gross margin drifts down to S$60-70/MWh for Q4.

Of course this is sum-of-parts valuation which may take time to realise without earnings support. Now YTL has shown the earnings potential to justify it.

Based on latest Q3 result, YTL made a net profit of RM414 million, annualised to an EPS of 15 sen. Attaching a PER of 12x, YTL is easily be worth RM1.80 per share.

As I have calculated in the latest article, YTL may achieve free cashflows of about RM3.0 billion a year or 27 sen per share. Hence, YTL will be able to declare dividends up to 20 sen a share every year while retaining 7 sen or RM770 million to reduce debts. Or YTL may choose to declare 10 sen dividends from next year first and retain 17 sen of RM1.87 billion to pare down debts more quickly, then gradually increasing the dividend payouts to 15 sen then 20 sen in later years.

When it pays out 10 sen dividend, at 6% yield, YTL should be worth RM1.67 per share.
At 15 sen dividends, YTL will be worth RM2.50 per share. At 20 sen dividends, YTL will be worth RM3.33 per share.

So I will target RM1.60 - RM1.80 as my first target price for YTL, based on 12x PER or 6% dividend yield on 10 sen dividend payouts.

My earlier valuation target of RM6.42 per share for YTL was the sum-of-parts valuation in the bluesky case. Compared to the conservative case valuation of RM4.53, the bluesky case anticipated additional RM15.9b valuation from YTLPower and RM5.0b valuation from MCement. And the additional RM15.9b from YTLPower was mainly from Wessex (additional RM18.7b in bluesky case vs RM6.9b in conservative case) and PowerSeraya (RM18.7b in bluesky case vs RM8.6b in conservative case).

Now we can see from the latest YTLP Q3 result, PowerSeraya contributed RM805m PBT or S$236 million annualised to S$947m, which is way way above my most bullish projection of S$312m then for the bluesky case. Deducting taxation of about S$150m and added back with depreciation charge S$75m, free cash flows will amount to S$872m a year. Now SGD has strengthened to RM3.40, so at 7% free cashflow yield, PowerSeraya may now be valued at S$872m / 7% x 3.4 = RM42.3 billion.

Wessex may be valued at 1.3x RAB which is about the average valuation of the three listed water companies in the UK, i.e. RM12.8 billion based on RAB as of 31 Mar 2023. At the end of the 5-year regulatory period, RAB is expected to increase to 3.89b pounds, so at 1.3x RAB, Wessex will be valued at RM15.1 billion by 2025.

As you can see, the additional value attributed to PowerSeraya now has more than enough to give the additional value of RM20.9bn to YTL to justify the bluesky case valuation of RM6.42 per share for YTL.

And this sum-of-parts valuation will only get larger as long term assets like Wessex and Niseko landbank appreciate in value.

Operating cashflows are even stronger at RM205.5 million in the first 9 months, annualised to RM274 million or 42 sen per share. Minus capex of RM19m for the year, free cashflows may amount to RM255 million a year or 39 sen per share.

Hence Padini will be able to declare 12 sen dividend or higher for this year.

@xiaochen, I remember SEA has a 60% stake in the digital bank JV while YTLP has 40%, or the other way round?

In any case, SEA has the experience and YTLP will be happy to follow and complement its strategy

@Sslee, this 100MW power export deal was announced before our government lifted the ban on RE export. So YTL Power needed to get the power from Tenaga Nasional gas-fired power plant first. For this trial export, YTL Power may just earn a small commission by buying power from TNB and selling it to Singapore via PowerSeraya.

I am glad many have found my articles useful, especially those who have the knowledge and patience to really study the accounts and the numbers. As you have probably noticed, stocks that I cover do not immediately go up in share prices, so my articles and recommendations are not suitable for short term traders who tend to skip the contents of the article but purely look at the "high target price". When they see share prices do not move up in few days, they will complain and talk down on the "high target price". I don't give a damn. It is better for short term traders to sell quickly so that I can accumulate more. I welcome constructive comments and critics but please back them with facts and sincerity.

I do not set a target price for the stocks that I cover, but rather I just suggest a fair price based on cashflow yield or sum-of-parts.

At times, the fair price I suggest looks high to some, it is just that the company has yet to show the earnings growth I projected or the market has not realised the earnings potential of the company.

For example, when I first published the article on YTL Power in last May, I already stated that PowerSeraya had made gross margin of S$60-80/MWh before back in 2009-2013 based on my studies, but nobody believed it then and the company had not shown such earnings power yet. Now in this Q3, PowerSeraya has showed that it has indeed made gross margin of S$80/MWh but some analysts/investors tend to think that such high margin is not sustainable and is just one-off. Let the time proves it wrong or right.

Now I have been talking about the potential of the green data centres, but nobody or no analyst has given any value to this new business division as it has not yet started contributing earnings yet. By the time this division starts to contribute tens of millions of profit every quarter, it will be too late to chase this stock.

For us to beat the market, we need to study well and make reasonable assumptions on earnings potential, and see things before the market does, then only we can outperform and buy at low prices. FYI, I have grabbed plenty of YTLP shares at around 70 sen when I first published the 1st article. Again patience is the key.

I do not have the latest research report of HLB on MCement. Based on your note above, HLB is giving a TP based on 0.87x of fully diluted P/B. If the fully diluted book value is RM3.30 as per what you calculated above, then the TP given by HLB is RM2.87?

Again, I am not a fan of the P/B valuation method, unless you think that MCement may be sold to another party at such a valuation method. Another reason why I do not like the P/B valuation is that MCement has a large asset value after incorporating assets of YTL Cement and Lafarge, which has quite some spare capacity in current cement market here.

Also I am puzzled on HLB suggestion to apply a 50% discount to the 10 year mean P/B of MCement, based on the 2 reasons above: 1) lower infra spending now, 2) heavy carbon emitting

Cement business is always heavy carbon emitting, and has been like that in past decades, why apply 50% discount now on such an environmental concern?

Lower infra spending now compared to the past? Lower by how much? compared to which year in the past?

To me, it is just an arbitrary number.

The replacement cost method you presented above is sound, my only reservation is that we may need to apply some discount as MCement has not been using up all its production capacity, not even 70% after incorporating capacity of YTL Cement and Lafarge.

Apologies, I made a mistake in the above cashflow calculations. I need to deduct projected tax payments estimated at RM140m a year, so free cashflows may come to RM510 million a year, still able to support dividend payouts of 30 sen a share. (excluding ICPS which I assume is not entitled to ordinary dividend payouts)

Wessex just made the provision in this Jan-Mar 2023 quarter, which means that they may have missed out on adding the impact of such higher interest rates into the water tariff hikes already in effect since 1st April. If so, they may get it reflected in the next review end of the year to determine the required water tariff hike from 1st April 2024.

But I am not too sure if there is any adjustment in the quarterly review or any true-up mechanism that comes earlier than the next yearly review for 1st April 2024.

We will be able to get a sense when we see the result for next quarter April-June 2023 from Wessex.

@observatory, I do not have any more info than you on this provision item in Wessex, besides the explanation given in the quarterly result notes.

From what I understand, Wessex has issued a few tranches of bonds, some of which may be linked to certain index (which I do not know what index it is). I suspect such bond has a yield that is linked to certain baskets of interest rates like LIBOR. When interest rates move up in the UK, such index-link bond price will fall and yield goes up. UK accounting treatment may require Wessex to mark to market such an impact from higher bond yields, hence the provision.

It is a non-cash item at the moment as it is just a reflection of higher bond yields to pay in the future. But eventually Wessex will need to pay for higher yields to the bond holders. Such higher interest payments will be captured in the next regulatory review of water tariffs to reflect on the higher costs of doing business, hence resulting in higher water tariffs to compensate for the higher interest payments made by Wessex in order to deliver the required services.

@cooledhawk123654, I meant Q1 calender year 2024, i.e. Jan-Mar 2024 to see earnings contribution from the first phase of green data centre

whether I syok sendiri or someone has missed out on this stock, time will tell. Friday huge buying volume already speaks louder than @speakup.

YTL typically declares dividend only in the final quarter, you can expect higher dividend than last year when they report Q4 in August.

Royce Chan, the disposal gain was booked in last year, not this year. There was not exceptional item in this Q3, so the strong earnings will sustain in coming quarters.

As for projections of revenue and profits going forward, it is not easy. To be honest I have got it wrong twice, both occasions on the cost side.

MCement achieved revenue of RM990m in the latest Q3 2023 and gross profit of RM277m (gross profit margin of 28%). If annualised, MCement may achieve revenue of RM4.0 billion a year.

But this can change easily, depending on the coal prices and bulk cement selling prices going forward. I would expect gross profit margin to expand in next Q4 after the assumed forward hedges at higher coal prices wind down.

However, over long term, I think the current margin of 28% can sustain or at slightly higher level of 30% when demand improves. So on a sustainable basis, I would expect gross profit of RM300m per quarter and RM1.2 billion per year.
Minus out depreciation charges, interest expenses and other overhead that total RM750-800m a year, profit before tax can maintain at around RM400-450 million a year.

Cashflows will be higher at RM650-700m a year after adding back depreciation charges. Capex is usually less than RM50m a year, so free cashflows may hit RM650m a year or 50 sen a share.
Assuming a 60% payout, dividend payments may top 30 sen a share, which values the stock at RM4.28 at 7% yield.

@Observatory, first on the 467m ICPS, I think I have included this into the enlarged share base of 1,310 million shares. I double checked that MCement share base was 853m in 2020, so total share base has expanded by 457m, a little short of the 467m you stated.

I am not sure of the discrepancy. You may have more details.

YTLP is partnering SEA Group in rolling out the digital bank business in Malaysia. SEA has itself started its own digital bank business SeaMoney which reported almost 7x increase in revenue in 2021 to S$470 million. Though it is still loss making, the management expected it to be cashflow positive by 2023 when they hit revenue target of S$1.1 billion to S$1.3 billion.

Any lending business is naturally profitable, earning the difference between the lending rate and funding rate. It is just how good the bank controls its costs and loan profile.

YTL group has been known for good cost control and with the experience of SEA group, I think their digital bank venture will have good chance of making decent profits, especially when both have their own large customer base in Shopee and Yes.

https://klse.i3investor.com/web/blog/detail/dragon328/2023-05-26-story-h-269658206-YTL_YTL_Power_Croaching_Tiger_Hidden_Dragon

An update note based on latest quarterly result