What they should do and what the industry players should agree to is to cap the wholesale electricity prices to a lower upper limit currently at S$5,000/MWh. They could agree to cap it at say S$2,500/MWh or even S$1,000/MWh, it does not matter and it will not affect Gencos' profit much.

What it will do is effectively capping any spikes in wholesale electricity prices to the lower cap price say S$2,000/MWh. So the headlines news that said wholesale prices hit above S$3,500/MWh during peak hours will only recur at a lower price of S$2,000/MWh. Immediately the headline increase in weighted average wholesale prices is capped at a more reasonable figure, rather than this 3,000% rise in the news above.

The EMA could try to regulate the wholesale electricity prices which shot up to over S$3,500/MWh during peak hours, but that would not affect Gencos' profits much as Gencos tend to hedge the electricity selling prices with their retailers, bypassing the volatility of the wholesale pool prices.

The Singapore government could try to build new power generation capacity on its own but it would go against the free market principle of liberalising the power market in the first place. If it built too much capacity, then it would crash the electricity prices and make Gencos losing profits or making losses then foreign investors in these Gencos would just leave the market as the rule of the game has changed, which might dent the image of Singapore government who would be the only generator in town. Singapore government knows the bad consequences for which it will pay a much higher economic price for disrupting free market principles.

It is good to regulate the wholesale electricity market to a lower upper cap price, currently it is at S$5,000/MWh. Even if they cap the max price at S$1,000/MWh, it will not have impact to Gencos' profit, but it will have a small effect on the weighted average wholesale price which tends to be the headline price the media or households are complaining about.

On the other hand, when LNG prices have dropped so much, it helps to lower the overall electricity prices paid by businesses and households while Gencos can still enjoy decent margin.

Take an example, when crude oil prices were at US$120/bbl, the fuel portion of Singapore electricity pricing was around S$200/MWh. Added with a non-fuel margin of say S$40/MWh, the total electricity pricing paid by households was about S$200+40 = S$240/MWh.

Now when LNG prices have dropped by half to equivalent of US$60/bbl of crude oil, the fuel portion of the electricity price is about S$100/MWh. Even if Gencos load it up with a higher non-fuel margin of say S$80/MWh, the total electricity price paid by households is just S$180/MWh which is 33% lower than before. But Gencos enjoy a 100% higher profit.

@ChloeTai, nothing to worry about. Pls see my comments above reproduced below:

The EMA could try to regulate the wholesale electricity prices which shot up to over S$3,500/MWh during peak hours, but that would not affect Gencos' profits much as Gencos tend to hedge the electricity selling prices with their retailers, bypassing the volatility of the wholesale pool prices.

The Singapore government could try to build new power generation capacity on its own but it would go against the free market principle of liberalising the power market in the first place. If it built too much capacity, then it would crash the electricity prices and make Gencos losing profits or making losses then foreign investors in these Gencos would just leave the market as the rule of the game has changed, which might dent the image of Singapore government who would be the only generator in town.

Even if the EMA or Singapore government tries to build new capacity on their own, it would take at least 3.5 years for any new capacity to come online. This simply means the electricity supply in Singapore will remain very tight for next 3 years until 2H 2026 at the earliest.

The EMA could try to regulate the wholesale electricity prices which shot up to over S$3,500/MWh during peak hours, but that would not affect Gencos' profits much as Gencos tend to hedge the electricity selling prices with their retailers, bypassing the volatility of the wholesale pool prices.

The Singapore government could try to build new power generation capacity on its own but it would go against the free market principle of liberalising the power market in the first place. If it built too much capacity, then it would crash the electricity prices and make Gencos losing profits or making losses then foreign investors in these Gencos would just leave the market as the rule of the game has changed, which might dent the image of Singapore government who would be the only generator in town.

https://klse.i3investor.com/web/blog/detail/dragon328/2022-04-26-story-h1622262012-BPlant_has_Tremendous_Upsides_as_a_Prime_Take_over_Target

The attraction of BPlant lies in its huge non-core landbank of over 9,100ha that fetches a market value of RM1.29 per share of Bplant. My conservative case valued this non-core landbank at RM4.00 psf or almost RM1.80 per share of BPlant

@xiaochen, ya I also checked. Credit Suisse (Hong Kong) first appeared as a shareholder of YTL Power with a 3.10% stake in AR2019, which means it acquired the stake between Sept 2018 and Sept 2019. The share price of YTLP was trading between RM0.90 to RM1.30 during this period, so the average purchase price of Credit Suisse (HK) should be in this range.

Correction. Credit Suisse (Hong Kong) first appeared as a shareholder in YTL Corp with 4.6% stakes in Annual Report 2019, which means it acquired the stakes between Sept 2018 and Sept 2019. During this period, YTL share price was trading at RM1.10-1.40, so the average purchase price of Credit Suisse (HK) should be in this range. So it will not sell its stakes at anything below RM1.10.

UBS acquired the 0.8% stake in YTL after Sept 2022 when AR 2022 did not show its name as a shareholder. I assume UBS acquired this stake in past 1 month when trading volume was high, so its average cost of purchase should be between RM0.825 to RM0.94.

I suspect there could be another corporate move involving MCement coming soon

Nice closing at year high 0.975 with heavy volume. MCement also closing at year high.

10m shares makan up at last minute to 0.975 is no small fish.

If a foreign shareholder is just a passive investor like Morgan Stanley in Media Prima earlier, it did not bring any tangible benefit to the company.

But if the foreign shareholder is a prominent investor or a bigger growing company, then it may add value. The former case is a vote of confidence in YTL and the company prospects, the latter case is better with the new shareholder bringing in strategic corporate deals or construction order book for YTL.

We still do not know who is behind this 4.6% stake held thru Credit Suisse (Hong Kong) account, it should be for a rich client of Credit Suisse.

I think you meant YTLPower, as it was just announced this morning Credit Suisse had a 4.6% stake in YTL, plus another 0.8% held by UBS

@xiaochen, did you mean YTLPower or YTL for Credit Suisse (Hong Kong) as the 8th largest shareholder?

There were total 841 million shares traded in 3 weeks from 17 May 2023 when the share price jumped from RM0.665 to a high of RM0.985, assuming 50% of these were acquired by Credit Suisse/UBS, it means 420m shares were acquired at an average price of RM0.825.
Then the share price consolidated between RM0.90 to RM0.98 until yesterday with 300 million shares traded. Assuming again 50% of these were acquired by USB, then average price for these 150m shares was about RM0.94. So the total 570m shares acquired by UBS should average about (420 x 0.825 + 150 x 0.940)/(420+150) = RM0.855.

For a foreign fund to buy into a substantial stake like this, usually they will look for easily 50% to 100% upside from their average purchase price, so I am looking at RM1.28 as 1st target and RM1.70 as 2nd target for YTL.

The entry of UBS as the new substantial shareholder in YTL speaks loud on this promising growth stock

@super911, there is no quick answer to your question. But I try to give my thinking on this:

YTL has been in the telco business since it got the wimax licence some 10 years ago and no doubt it has been bleeding non-stop. All this while, YTL has been trying hard to gain market share in the competitive telco business but has not been successful as the industry has been dominated by Maxis, Celcom and DIGI which have lucrative voice business segment. What it has tried to do is to control losses by cutting operating costs to the minimum and by doing some government programs to help increasing the topline. If it exits the telco business now, how to exit? Who wants to take over? Take over for how much? It won't fetch much valuation which will certainly not enough to cover the capital investment so far.

It is waiting for a turning point, and I believe the turning point is coming now with the 5G roll-out. By getting access to DNB 5G network, every telco will have the same cost structure at least until the coverage reaches 80% nationwide. Hence YTL Yes will have the same competitive edge against every other telco in the 5G business. When it is rolled out to 80% nationwide, mobile 5G may be able to replace fixed line broadband service in every household as it will be cheaper (eg. RM30 per month for 30GB per 30 days or <RM80 for unlimited 5G data vs RM168 per month for unifi unlimited data) and faster (700 MBps - 1 TBps for 5G vs 300-500 MBps for fixed line broadband). For one, I will switch from unifi to mobile 5G then as I will save half the fee every month.

There are potential 10 million households in Malaysia and over 30 million mobile phone users. If YTL is able to get 10% market share for mobile 5G business, it will have about 3 million mobile 5G users. Assuming RM50 per month of mobile 5G fee on average per user, potential revenue for YTL Yes could reach RM150 million a month or RM450 million revenue per quarter.

Right now, Yes is doing revenue of RM109m a quarter and pretax loss of RM103m a quarter, meaning the operating costs are about RM212 million a quarter. So if Yes can do revenue of RM450 million a quarter, it will have a chance to turn in a pretax profit of RM238 million a quarter.

If it only gets 2 million mobile users, then potential revenue will be RM300 million a quarter and pretax profit will be about RM88 million a quarter.

For only 1 million mobile users, Yes could make revenue of RM150 million revenue a quarter and cut pretax loss to RM62 million from RM103m currently. Added back with non-cash depreciation, operating cashflows may turn positive then even with just 1 million mobile 5G users.

Then only it makes sense for YTL to consider disposing off this telco business and other telcos will consider taking over at a decent valuation.

ya many of the hotels and shopping mall assets are parked under YTL Hosp REIT and Starhill Global REIT, but YTL is the ultimate owner of all these assets and will benefit if these overseas assets earn more from operations or strong currencies.

Besides, there are still many assets parked under YTL Corp directly such as the huge landbank in Sentul and Japan Niseko, and some hotels and resorts which have not been injected into REIT yet.

@hng33, YTL also owns numerous hotels, resorts and shopping malls across Australia, Japan, UK, Europe and Singapore, which will benefit a lot from border re-opening and strengthening currencies in SGD, USD, AUD and Yen.

ChloeTai, I am not aware of any particular bad news for YTL. The current share price weakness is not a big surprise given the poor market sentiment when state elections are around the corner.

Whether or not YTL will bag the MRT3 package at RM10.8bn, nobody knows at the moment. I guess the government has not made a decision yet when focusing on the upcoming state elections. The fact that YTL put in the lowest bid for the above ground package at RM10.8b still gives an advantage to YTL to become the winner, at least the pricing has been made transparent to the public. If the government does not award the package to YTL, it will have to make a good explanation why it does not, either on technical ground or other reasons.

@hng33, yes I did notice that YTL cement division PBT is higher than MCement PBT despite having a 77% stake in MCement. I think YTL may own stakes in other smaller cement plants and some concrete division that have not been injected into MCement

hng33, thanks for the video on Attarat Power. Fantastic achievement and world class facilities.

It is the largest oil-share fired power plant in Middle East and Asia, which burns indigeneous fuel for decades to come.

That makes me believe that Jordan needs this power plant and the ongoing arbitration case will be favourable to YTLP.

30 years of concession of oil-share mining and power generation with option to extend for another 10 years or more. The video says that Jordan has the 7th largest oil share reserve in the world and the reserve may last probably for 100 years. This pave the way for a new project or extension project for YTLP after this first project takes off well.

Both the Kwasa Damansara and UK Brabazon property projects are multi-year long term projects which may bring in construction work worth billions of ringgit to YTL.

Potential upsides will be for YTLPower to secure more green data centre jobs which will add to its existing RM7.0 billion job streams secured so far.

good closing. Share price has more than recovered from the dividend adjustment. 2.5 sen dividend is now free

@apple888, this 2.5 sen dividend is ex tax, it is now single-tiered tax deduction at the company level

see just now someone sold almost 1 million shares of YTLP in a couple of minutes and pressed down the share price to RM1.26. It might have been EPF who still has over 400m shares of YTLP. We may get opportunities like this in next 2 months to accumulate YTLP at lower prices.

@speakup, yes I need to chill out under such hot weather. Will go for a short trip in coming weekend.

Apologies for my harsh words. But I was simply fed up with those people who simply put out offensive remarks or baseless allegations.

Just like the case of Daibochi last year when someone buta buta defended the unreasonable privatisation of Daibochi by Scientex. I predicted very early on that the privatisation attempt would fail simply based on the low offer price and the bright prospects of Daibochi then. It indeed failed miserably. That guy was saying how good Scientex as a company was and how great the boss was, but that was not the point. The point of discussion was the low offer price.

Anyway, I will not respond to these baseless remarks anymore. Waste of time.

If you do not know how to read balance sheet and cashflow statements, or are too lazy to make an effort to study the company prospects , but base your investment decision just based on hear-say or ah beng ah lian critics, pls move to other counter. We don't need such traders over here. We prefer investors who are patient and ready to hold for 2-3 years at least.

If you missed the boat and like to see the share price drop to buy in, you may get the chance in next 2 months. Don't simply sabotage and derate a company by using generic remarks with wrong facts.

@wps123, I don't know where you got the figure of RM36 billion debt from. Based on latest quarterly report as of 31 Mar 2023, YTLPower had total debts of RM30.9 billion and RM8.9 billion of cash, so net debt of RM22.0 billion. Pls get your facts right before you made baseless allegation.

YTLP operating cashflows totalled RM2,171 million for 9 months of FY2023 and topped RM1.0 billion for 3Q FY2023 alone, annualised to RM4.0 billion. Minus off capex of about RM2.0 billion, YTLP will still have RM2.0 billion of free cashflows or 25 sen per share every year. It can support easily 20 sen dividend payouts every year going forward.

The debts mentioned above are mostly sitting at subsidiary level and ring-fenced at each subsi company, i.e. they will not have any repercussion nor cause any cross default to the holding company. FYI, there is some few hundred millions of free cash at the holding company level for future project investments. The debts sitting at the subsidiary levels like Wessex and PowerSeraya are tied to the long term assets, and have their own repayment programs and financial covenants such as for a long term bond with bullet payment at maturity. Debt servicing is never a problem, especially now with strong cashflows from PowerSeraya (that top SGD1.0 billion a year) and impending turnaround in Wessex profits.

You should spend some time studying the balance sheet and cashflow statements, rather than just making baseless claims that made yourself look stxpid.

pang72, I sent you the CIMB reports on YTL and MCement. Pls check your message inbox

In its latest research report on YTL out this morning, CIMB raised tp for YTL to RM1.28 while it upgrades MCement and YTLPower.

One surprise the report mentions about is that YTL put in the lowest price for MRT3 above ground civil work package at under RM11 billion. YTL partnering CRCC also bidded for the turnkey signalling package valued at RM7.0b to RM10b. These jobs will increase demand for cement as well.

CIMB latest research report on MCement out today, tp raised to RM5.08 from RM3.97.

It forecasts free cashflows of around RM680 million for FY2024 and FY2025, supporting maiden dividend payouts from FY2024.

@amateurJR, you seem to be more familiar with this product development. Now it is already 2 years past since the JV started in Jun 2021. When do you expect they will have a breakthrough in new composite products?

If you have more info on this JV and its prospects, please share.

It was a disappointment as initially I thought this JV was promising in making breakthroughs in composite hoses which would enable multi-year growth to Wellcall, but it has so far not made any significant breakthrough.

@Lim Yap, I saw a note in CIMB research report dd 9 Dec 2022 on Wellcall, that said that Wellcall recognised an impairment loss of RM2.9 million Q4FY2022 for its JV with Trelleborg. Wellcall was reported to have invested an initial capital of RM4.5 million in this JV which has been bleeding at RM1.0m to 1.5m every year since Jun 2021. I am not sure whehter Wellcall made any further impairment on this JV after Q4FY2022, but at least it has impaired 64% of its investment.

Wow Ran271221 you have been holding YTLP shares for 20 years, good for you!

Hold it tight for another 2 years and you will be rewarded handsomely.

No, I don't have anyone working inside YTL but do have friends working in the power industry. Anyway, it does not take an expert in the power line to understand the utility business of YTLP, you just need to follow the company development long enough and do some background studies on the industry.

Yes, rising interest rates will tend to lower inflation as a normal tool used by central banks to tame inflation.

In the case of Wessex Waters, high inflation will increase operating costs and erode profits, and rising interest rates will increase borrowing costs and erode profits.

High operating costs will be compensated through higher water tariffs in the operating cost component of the water tariff. Higher interest rates will result in a higher WACC (weighted average cost of capital) used to calculate the water tariffs which will adjust higher to compensate for the higher interest costs.

Thanks probability for the update article.

Basically what the management updated to analysts as highlighted in the article is in line with my understanding, the positive surprise is the confirmation that Jordan power plant has achieved full commercial operations and will soon receive some payments from the offtaker.

EPF just ceased to be a substantial shareholder of YTLP and still has some 400 million shares for potential sell off. Looking at its aggressive selling of 5m to 6m a day, it would probably take 67 to 80 days for EPF to completely sell off its stakes in YTLP.

Compared to YTL, EPF has been even more aggressive in selling, sometimes at over 20m shares a day, so its stakes in YTL should be low now. That's why we see YTL share has been running up more than YTLP which is capped by EPF selling.

@i3lucker, I am afraid that you were wrong on the valuation of utilities companies.

FYI, Keppel and Sembcorp are trading at PER of 13x to 14x.

The three water utilities companies that are listed in the UK are trading at PER of over 20x.

YTLP disposed off Electranet, an utility company, at PER of over 30x.

I hope you know what you were talking about.

Just be patient, and you will get a good time to accumulate YTLP as EPF is selling aggressively now and state elections are coming soon.

@probability, I have put in some comments in that article trying to answer your queries

In short, electricity prices tend to move in tandem with gas prices though at a lag. But Gencos' profit is typically locked in via CfDs with retailers and protected for 6 -24 months ahead.

As gas prices have fallen, we may see retails electricity prices to soften in 2-3 months ahead but it does not mean that Gencos will make less profit.

But if certain Gencos have locked in low gas prices for next 1-2 years ahead, and when gas prices do fall further, they may make less profit from the "extra" profit in the fuel component which they are not supposed to make at normal times.

I hope this helps to answer some of your queries.

@probability & @sslee, glad that you were having interests in knowing more about Singapore electricity market. Many analysts do not bother to understand it and simply treat it as a cyclic sector.

The figure of SGD259/MWh was the USEP averaged for Jan-Mar 2023 quarter in Singapore, as you may already know, USEP is the weighted average of electricity prices in all regions in Singapore over a certain period of time, for your info, electricity prices differ slightly in different regions in Singapore based on supply and demand in that region. To note that this average is for the half-hourly electricity wholesale prices which are cleared at the wholesale market every 30 minutes. This is a benchmark for some types of retails electricity contracts, which are priced at a small discount to the wholesale electricity pool prices.

There are various types of retails electricity prices besides the one I described above. Another type is a fixed-priced contract where electricity prices are fixed for a period of time, usually 6 months to 24 months. The other type of contract is a discount-off-tariff which is priced at a discount to the vesting contract price (which is itself the benchmark price used by the incumbent retails electricity supplier MSSL to supply electricity to households who have not switched to a private retailer).

Whatever type of electricity prices (wholesale or retails), there are two components in the electricity price - fuel cost and non-fuel profit margin.

Fuel cost is essentially the cost of generating the electricity which depends on gas prices and the efficiency of the power plant units. FYI, over 90% of power generation in Singapore is based on natural gas which is a mixed of piped gas from Msia/Indonesia and LNG (liquified natural gas) imported from various countries.

Usually the fuel cost component makes up the bigger part of the electricity price, eg. SGD180/MWh vs SGD79/MWh in the average USEP of SGD259/MWh.

When gas prices drop, then electricity prices drop. TO note that vesting contract price and the MSSL supply price to HDB flats for a quarter are based on the average gas prices in the prior 2.5 months, eg. vesting price for April-June quarter is based on average gas prices for 1st Jan - 15 Mar. So you always see a lag effect in the electricity prices to HDB flats or vesting prices from falling or rising gas prices.

Gencos in Singapore makes the bulk of their profit from the non-fuel margin, very little from the fuel cost component unless their gas units are more efficient than others.

Gencos typically have contracts-for-differences (CfD) with their own retails supplier to hedge against the fluctuation of the wholesale electricity prices, i.e. they price the generated electricity at their fuel cost + non-fuel margin for their retailer to sell to customers. In this way, Gencos' profit is more or less certain for the period where their generation has been hedged with their retailer, typically for 6 months to 24 months. Usually their profit is not affected by the fluctuation of the gas prices or the wholesale electricity prices. But as part of their generation is still covered by vesting contracts, so their profit margin to certain extend is based on the non-fuel margin agreed at the vesting contracts.

When supply is tight, wholesale pool prices tend to trade high, especially when all the efficient combined-cycle plants have been running max and the less efficient open-cycled unit or oil-fired units are required to run setting the marginal price at the pool. As such open-cycled unit or oil-fired unit is usually not required to run and hence not contracted for differences with the retailer, so that generation from such less efficient units will need to be priced higher at the pool to cover their higher generation costs plus an ad-hoc profit margin. This ad-hoc profit margin can sometimes be very very high when pool prices spike to like SGD1,000/MWh or at occassions max SGD4,500/MWh for a couple of hours during peak hours.

Well said @xiaochen.

Your analogy of Singapore electricity rates and air tickets is appropriate. Electricity prices will rise when supply is tight, and will fall when demand softens.

@cktay, as what you pointed out, Lafarge cement used to make RM120m pretax profit a quarter, now MCement is larger than the then Lafarge, hence higher revenue. If Mcement gets its cost hedging right, it is not surprising for it to make RM120m pretax every quarter.

But there are always challenges in any growth story for a company. In the case of YTLP, it faced great challenges in the Jordan project during construction during Covid-19 times and then encountered counter-party challenges when it was about to complete the construction. The case is still pending an international arbitration judgement but Jordan needs power so YTLP's plant was required to run up anyway. Then Wessex Waters was hit by high inflation and high interest rates that eroded almost all its profits in past 2 quarters. These challenges test the wisdom of the management.

PowerSeraya is on high ground now as the electricity supply is tight and hence generation and retails profit margin is good. But before that, it was hit by over-supply situation that pushed it into losses for several quarters, and there was nothing it could do about it besides cost cutting and capital preservation. There will be challenges in the future for sure, eg. the RE power import by 2035, you need to get satisfied with the ability of the company management to deal with such challenges and ensure the long term growth and viability of the company.

@yong1985cm, my intention of putting up the comparison of Press Metal vs YTLPower was not to derate PM, but rather to highlight the possibility that YTLP may be re-rated to similar level of PM, both of which are great companies.

I first bought into PM when its first phase aluminium plant started commercial operations in Sarawak back in 2000s, and I have made almost 7x by holding onto it for few years. I admired the vision and bold decision of the boss and thought that the cheap electricity it capitalised on in Sarawak would give it great competitiveness against regional players.

Now I see another growth story in YTLP, just like what we have witnessed in PM. Don't miss the boat!