Investment Holding Activities registered a pretax loss of RM45.6 million in the absence of any disposal gain, offset by higher interest income.

This also means that the green data centre has yet to make any contribution to the group profit. This division will start making profit contribution from Q1 2024.

The telecommunications division is disappointing with pretax loss doubling to RM106 million in this Q3 FY2023 from RM52m loss in Q2 FY2023. There is not much explanation given, but I suspect its Yes 5G has not gathered sufficient subscribers yet. I am not sure what other costs besides device costs that have been booked in, maybe some cost of subscribing to DNB network.

Wessex Waters registered pretax loss of RM47.2 million in this Q3 FY2022, that is due to interest accruals on index-link bonds, a non-cash impact of RM75 million. Excluding this, Wessex Waters would have made a pretax profit of RM28 million.

Wessex Waters has since revised up its water tariffs from 1st April 2023, and I see this adjustment will add easily RM100 million to its revenue and pretax profit in Q4 FY2023 onwards.

So from next quarter Q4 FY2023 onwards, I see Wessex to contribute normalised pretax profit of RM130m to RM150 million every quarter to YTLPower.

@myloh123, I almost fell off my chair when I saw the net profit figure of RM507 million.

Then when I looked into the detailed breakdown of profits, I also pengsan.

My god, the Power Generation division alone generated Pretax profit of RM806 million. That's crazy. Even after I deduct off associates' contribution (from Jawa Power Indonesia), still pretax profit came to RM760 million.

I suspect some profit might have come from Jordan power project, but I did not see anywhere in the result note that mentioned about Jordan power project. Furthermore, any contribution from Jordan Power will have come under Share of Profits of Investments accounted for using the Equity method, but this Share of Profits amount (RM46.7m) shows no visible improvement in this quarter, indicating that the earnings contribution from Jordan Power was not significant in this Q3 yet.

This means PowerSeraya alone contributed profit before tax of RM760 million in this Q3, that is about SG$230 million of PBT. You can see the taxation rate for this quarter was about 17%, which coincides with Singapore corporate tax rate.

For PowerSeraya to achieve PBT of SG$230 million in a quarter, it is possible. Back-of-the-envelop calculations show that PowerSeraya could have achieved gross non-fuel margin of SG$80/MWh at almost 70% running factor of all its efficient gas plants including the newly acquired Hyflux gas units. The last time Singapore wholesale market registered such a good gross non-fuel margin was during 2008-2013 when supply was tight.

We have seen a few occasions when the wholesale market electricity prices shot through the roof of above SG$1000/MWh during peak daytime in past few months, and PowerSeraya is in a very good position to capture such occasions by running up its open-cycled gas turbines or oil-fired machines to supply to the peak rates. On those occasions, gross non-fuel margin may hit well above S$300/MWh.

Furthermore, we can still expect higher quarterly profits going forward as Wessex Waters adjusts up its water tariffs from 1st April 2023, even higher earnings contribution from PowerSeraya due to heat wave and tight electricity supply, higher cement division contribution after costs drop off, higher hotels and shopping malls earnings contribution from higher tourism activities, and prospects of HSR.

Net profit of RM414 million or EPS of 3.78 sen annualised to 15.1 sen. A PER of 10x will rate it at RM1.51 per share.

The main earnings driver was YTL Power, though the hotel division also booked in huge improvements in profit before tax to RM58 million in Q3 FY2023 from a loss of RM32 million in Q3 FY2022. The cement division was a little below expectation due to higher than expected costs locked in for the quarter.

YTL Q3 result was fantastic, driven by the Utilities (YTLPower) division.

Pretax profit of RM815.7 million is the highest quarterly profit achieved in years, and this excellent result was achieved without any extraordinary item. (Note that Q3 FY2022 was boosted by an one-off disposal gain from Electranet).

@10bagger10, both YTL and YTLP are still undervalued.

YTLP offers higher dividend yields and more secured earnings growth in foreseeable future, while YTL offers potential higher upside potential from its cement division and HSR angle in near future and much higher asset value appreciation from its landbank.

You will need to consider your investment horizon to see which one suits you better.

@tonywong8, thanks for the info. Due to the extremely hot weather, it is normal for power demand to surge up in Singapore, especially as oil & gas prices have softened.

Just imagine, when crude oil prices hit above US$100/bbl, electricity prices in Singapore could have hit SG$400/MWh or higher on occassions. Now households there are enjoying electricity prices 30% cheaper than recent peaks, so it encourages higher electricity consumption.

As for Yes 5G business, I am not very optimistic on its potential earnings contribution. I just hope for this division to break even and not drag down the whole group performance.

As for its equity subscription to DNB, it is a separate business decision. If DNB can achieve 80% nationwide coverage, it will be profitable and YTLP's equity investment in DNB will not go down to the drain. Things are quite fluid at the moment and I expect changes along the way.

@Alex Chua, there will be competition for sure in data centre space, whether it is in the turnkey EPCC role, or solar panel supplier and installer, or EPCC-owner role.

It is easy to be a solar panel supplier or installer, there are plenty in Malaysia, some are even listed companies. To be an EPCC for green data centre, one needs to have construction experience and working capital, again there are plenty in Malaysia who can be an EPCC for green data centre.

What sets it apart for YTLP is its role as the EPCC-owner of green data centre, which requires deep pockets to fund the construction of green data centre and gets the return over a concession period. Also it needs expertise in construction, solar power generation and maintenance, contracting, financing and wide contacts with global data centre clients. You don't get many local players who have all such expertise and financial power.

As for cost overruns due to high solar panel prices, I can assure you that YTLP has decades of experience in dealing with such cost issues in large infrastructure projects and they know how to hedge all costs properly in order to lock in the required profit margin. Another note is that solar power part only forms about 10% of the overall costs for building green data centres, the bulk of the costs are actually related to data centre equipment.

And the 1st phase of the green data centre job at the Kulai site by YTLP has achieved financial closure, meaning that banks have been satisfied with the revenue model, costing and returns of the project before they agreed to lend money to fund almost 80% of the project costs. For such a big project of about RM1.5 billion, banks are usually very careful with the project economics and must be happy with the debt service ability of the project before financial closure.

@Apple888, RM1.30 is just a matter of time. I would expect it to be tested within this year

The gas price coming off peak will reduce revenue of PowerSeraya, but may not reduce the profit. As I know, most power generation companies in Singapore tend to hedge almost 100% of fuel costs to protect the profit margin. They sell electricity contracts to customers taking into account the respective hedged fuel costs, so they always earn a "fixed" or "preset" non-fuel margin on top of fuel costs irrespective of fuel cost price movements.

Lower fuel / gas prices will make the overall electricity prices absolutely lower so encourage more uptake, indirectly helping power generation companies to earn more topline and bottomline.

Exactly how much MCement can earn this quarter, I don't know. But looking at the parameters, I expect MCement to report a record quarterly EBITDA and profit.

Hume made how much profit in its latest qtr? RM15m or so? MCement will easily beat that by 7x.

It is indeed a weak set of results for Q3 FY2023 that has caused insiders to have sold down BJFood in past few weeks from over RM1.00 to now RM0.825.

The Q3 quarterly result is no doubt disappointing but I feel that the share price drop over past few weeks has already reflected the weaker result. After all, the cumulative 9 months of FY2023 pretax profit is still 2% higher than 9M FY2022.

I am confident that the management will be able to adjust product pricing and control costs to bring back up the pretax margin in coming quarters.

As a rule of thumb, every 10% increase in MCement revenue from current level will add almost RM400 million in the topline and over RM200 million of EBITDA and operating cashflows to MCement every year.

Exactly, YTL cement division will be the biggest winner out of the HSR race as every construction player will need tonnes of cement. MCement has over 66% market share of the cement market in West Malaysia, and has spare capacity to ramp up supply when demand comes in

Right, HSR should be coming pretty soon, and may be much larger than before with possible extension from KL north to Penang and Thailand. So the pie is much bigger now than before and should be big enough for each big local construction boys like YTL, Gamuda, IJM and Berjaya group to each get a big slice of it.

Construction order book of YTL Corp is boosted up by easily RM15 billion for building green data centres for YTLP over next few years, and another few billion ringgit of order book for building data storage centre and warehouses for Shopee.

But the biggest jackpot is bagging a portion of KL_Singapore HSR which may be worth easily RM20 billion

YTL re-rating factors are immediate - explosive cement division earnings and strong rebounds in hotel & shopping mall businesses

YTLPower re-rating catalysts are gradual and certain in coming quarters

The differences now compared to last August are that bulk cement prices are above RM380/MT and coal prices have dropped by half since Jan 2023

https://klse.i3investor.com/web/blog/detail/dragon328/2022-08-29-story-h1628813084-YTL_Corp_4QFY2022_Continuous_Improvements_in_Utilities_Hospitality_and_

Read this article again to gauge how much earnings MCement can make in this upcoming Q3

The differences now compared to last August are that bulk cement prices are above RM380/MT and coal prices have dropped by half since Jan 2023

https://klse.i3investor.com/web/blog/detail/dragon328/2022-08-29-story-h1628813084-YTL_Corp_4QFY2022_Continuous_Improvements_in_Utilities_Hospitality_and_

Read this article again to gauge how much profit MCement can make in this upcoming Q3

GenS Q1 2023 result was good against last year Q1, but it was lower than Q4 2022 and market expectation.

Main reasons for the weak result were unfavourable VIP win rates and limited airlines capacity to bring in mass market visitors to Singapore (hence high air ticket prices).

As statistics shows, visitors from China to Singapore in May only reached 51% of May 2019 level, so there is plenty of room for this to improve in coming months.

Genting Singapore Q1 EBITDA is weaker than Q4 2022 mainly because of normalisation of VIP win rate and the fact that Q1 is seasonally the weakest quarter for non gaming revenue.

Furthermore, the arrival of Chinese tourists in Q1 was affected by low airline seat capacity (and hence high air ticket prices). Based on latest data, the airline seat capacity from China to Singapore in May 2023 only reached 51% of that of May 2019, so there is still a lot of room for the number of China tourists to Singapore to increase in coming months.

RE is not subsidised in Malaysia, but the normal household electricity tariffs are heavily subsidized by the government.

If you look at your household TNB electricity bill, you will see a sentence at the bottom of the bill saying that the true electricity bill without subsidy should be how much and the government subsidy for your monthly bill is how much. Generally our government subsidizes about 45% of our household electricity bill.

This is done through fuel cost subsidy mechanism between the government and TNB. TNB electricity tariffs are calculated based on certain ceiling price of fuel gas (fuel oil) and coal price, beyond which the fuel costs are borned by the government, so that our electricity tariffs can be fixed at such low tariffs of 21.8 sen/kWh to 51.5 sen/kWh.

The government recently took away such subsidy for large commercial and industrial customers by having TNB impose additional 20 sen/kWh of surcharge. This effectively reduces government subsidies by half.

Traditional power generation by natural gas at current crude oil prices of around US$80/bbl may cost higher than 40 sen/kWh. In comparison, solar power generation can be profitable at 21 sen/kWh as demonstrated by the winning tariffs in recent LSS4 tender.

As for catalyst, there are plenty coming:
1) a potential higher interim dividend in upcoming 3Q result
2) continued strong earnings contribution from PowerSeraya
3) Maiden earnings contribution from Jordan power plant in Q3
4) higher earnings contribution from construction of green data centre at Kulai
5) potential clinching of more green data centre jobs
6) higher earnings from Wessex from Q4 after water tariff hikes
7) financial closing for the other 200MW of data centre jobs

There is no reason for EPF to continue selling as YTLP prospects are looking better and PM is urging EPF to raise proportion of local investments to 70% from 66%. That should shift about RM40 billion of investments to local markets and about RM24 billion to Bursa stock market.

BJFood has opened 17 new Starbucks stores and 2 new Kenny Rogers stores in 1H FY2023, on track for a total new opening of 35 Starbucks stores and 5 Kenny Rogers stores in FY2023.

BJFood has incurred capex of RM34.3 million in 1H FY2023, so it may incur another capex of some RM38 million in 2H FY2023 if it does open another 18 new Starbucks and 3 new KR stores as planned.

So total capex for FY2023 may come to RM72 million, a lot lower than estimates of RM80m - RM108m by analysts.

BJFood operating cashflows were strong at RM106.2 million in 1H FY2023, annualised to RM212.4 million. Minus off anticipated capex of RM72.2 million, BJFood will have free cashflows of RM140.2 million or 7.2 sen per share.

This can easily support a total dividend payout of 5.0 sen, yielding 6.1% at current share price.
BJFood will still have some RM42 million to pare down debts after paying out 5.0 sen dividend in FY2023.

I suspect the quarterly result may be weak. Q3 ended March is seasonally weaker than Q2, furthermore BJFood earnings are pressured by higher material costs and higher labour costs. I hope it can maintain an EBITDA margin of around 30%.

But interest expenses will be lowered as BJFood pared down net debts by RM57.5 million in 1H FY2023.

The Ambank call warrant expires on 2 June, still 3 weeks away. Usually the call warrant issuer does not suppress the mother share price so early, some more if BJFood quarterly result to be released in next 2 weeks is good, then the warrant issuer will be left with no more mother shares to sell in the last few days before expiry.

What may be the reasons behind the share price slump of BJFood in past 2 weeks?

Weak quarterly result? or really call warrant issuer dumping the mother shares ahead of the expiry of call warrants?

https://www.thestar.com.my/business/business-news/2023/05/11/new-re-policy-updates-a-boon-to-local-players

My positive view on YTLP benefiting from the RE export ban lift is shared by MIDF

TM is the latest to pull out from equity subscription to DNB, expect YTLP to follow.

Then the whole DNB proposition will fall off before it starts, and the government and DNB and industry players will need to come to the drawing board again.

Things will not move then

@observatory, it may be time to relook at BJFood after its share price has corrected almost 30% from recent peak.

@observatory, the issues around DNB and the second network providers are very murky at the moment. If CelcomDigi is allowed to terminate their equity subscription to DNB, YTLPower may also be allowed to walk away from the deal if more details come out to make DNB a non-viable entity. Eventually DNB will be left with the government as the only shareholder with all private 5G providers joining the second network if it is cheaper with Huawei.

What you said is correct on the burden on DNB to cover 80% of areas including rural area. Naturally the second network provider will just focus on urban cities if given the choice. But I don't think the government is so stxpid in allowing that to happen. I expect the government to make sure an equal playing ground for DNB and the second network provider to ensure both can sustain as viable entities, otherwise it would defeat the purpose of allowing a second network in just to kill off DNB.

The switching from SWN to dual networks once DNS achieves 80% coverage is not expected to cause any significant impact to YES, as I do not expect the 2nd network provider will offer bandwidth rates much cheaper than the incumbent.

In any event, YES is not expected to make much contribution to YTL profit, I only hope for it to break even and stop bleeding once it can get about 1.2 to 1.5 million 5G subscribers

Even if there will be more RE available in Singapore once their power import program kicks in some 2-3 years later, I do not expect this new RE import will enable more green data centres to be set up in Singapore in a big way for 2 reasons:
1) any RE power to be imported by Singapore will definitely be more expensive than RE produced in Malaysia, as there will be wheeling chargers to be imposed by Tenaga for power transmission and other charges to be imposed by Singapore side especially the EMA for network charges and wholesale market related charges. Furthermore, any RE exporter from Malaysia or Batam to Singapore will try to benchmark their RE power tariff at a small discount to the existing electricity tariff in Singapore which is about SGD300/MWh or about 99 sen/kWh to maximise profits. Even a discount of 30% will result in a RE import price of 70 sen/kWh which is still 100% higher than prevailing tariff in Malaysia
2) land is scarce in Singapore so any land required for setting up data centres in Singapore will be a lot more expensive than that in Malaysia

https://klse.i3investor.com/web/blog/detail/ceomorningbrief/2023-05-10-story-h-271415877-Govt_Lifts_RE_Export_Ban_Details_Yet_to_be_Ironed_Out

This is good news which paves the way for YTLPower to participate in the export of RE power to Singapore in next 2-3 years

As I just found out, Resorts World New York City is 100% owned by Genting Malaysia, as opposed to my earlier calculations that showed an effective 76.4% stake by Genm via Empire Resorts.

RWNYC is the prime asset under Genm. As shown in calculations above, the 64 acres of land owned by RWNYC may potentially be worth US$6.1 billion or RM27.4 billion. This is equivalent to RM4.62 per share of Genm.

Should Genm win a full casino license in New York, then this RWNYC would be worth another US$4.0 billion more.

Resorts World Catskills is located near Monticello which is about 80km away from Manhattan (as measured from google map). RW Catskills sit on a large tract of land measuring over 1,700 acres, but land value there is a lot lower than that in New York City, with market value of US$2.00 - 4.00 psf. So the 1700-acre land owned by Empire Resorts there is probably worth some US$200 million. Empire Resorts has invested over US$900 million in this RWC, so RWC is probably worth about US$1.1 billion - $1.2 billion based on land + construction costs.

Earnings wise, Empire Resorts has just turned around with positive EBITDA since 2020. Maybank Research in its earlier reports forecast a positive EBITDA of about US$14m - $18m in FY2021-2023 without online sports betting and EBITDA of US$15m - $44m in FY2021-2023 with online sports betting. I am not sure how Empire Resorts has been doing with the online sports betting but earnings in last few quarters do not show big improvements.

@twynstar, I think you are right, Empire Resorts only owns RW Catskills and RW Hudson Valley. Resorts World New York City is wholly owned by Genting Malaysia.

I did further research after I posted the comments above yesterday and was about to correct my own mistakes. Thanks for pointing it out.

If we look at the valuation of Empire Resorts from the real estate angle, a US$1.0 billion valuation seems extremely cheap.

Empire Resorts owns three sites in New York :
1) Resorts World New York City (RWNYC)
2) Resorts World Catskills (RWC)
3) Resorts World Hudson Valley (RWHV)

RWNYC is located at Queens which adjacent to the prestige Brooklyn county and about 8km away from Manhattan financial district. RWNYC is the largest among the 3 sites, measuring a land size of 64 acres with over 1.0 million square feet of gaming floor and few hundred hotel rooms.

Genm is disposing of its 15.5-acre Miami land for US$1.225 billion cash, valuing the vacant land at US$1,814 per square foot (psf). Online checks show that commercial land was transacted at an average value of US$2,590 psf for all land deals above US$6 million in Queens from April 2022 to March 2023. Commercial land was transacted at a much higher average of US$15,632 psf for all land deals above US$50 million in Manhattan from April 2022 to March 2023, based on data from the Department of Finance, New York City.

If we take the average of the Miami land valuation ($1,814 psf) and the average commercial land value ($2,590 psf) in Queens, we get a potential value of US$2,204 psf which will value RWNYC's 64-acre land in Queens at US$2,204 psf x 64 acres x 43,560 sf = US$6.1 billion.

Added with the 1.0-million-square-feet gaming floor and hotels worth some US$1.0 billion, then RWNYC itself may be worth US$7.0 billion.

Even if we take a 50% discount for the large piece of land, RWNYC should be worth US$4.0 billion easily.

RWC and RWHV are smaller and may be worth some US$1.5 billion combined, so Empire Resorts should be worth at least US$5.5 billion from real estate angle.

Hence, I would say the current valuation of US$1.0 billion for Empire Resorts is extremely cheap.

Many were skeptical of Genm's deal with Kien Huat in acquiring stakes in Empire Resorts US. Let's look at the background and some numbers again before we conclude that it is a good or bad deal.

Genm first in Nov 2019 acquired a 49% stake in Empire Resorts at US$159.7 million, valueing Empire Resorts at US$326 million. Genm injected additional equity of US$173m in 2020 and equity of US$187m in 2021, which raised GENM's stakes in Empire Resorts to 66.6%. The two additional equity injections effectively increased equity value of Empire Resorts to (159.7m +173m + 187m)/66.6% = US$780 million.

In the latest move, Genm raised its stakeholding in Empire Resorts by 10% at US$100m, valuing Empire Resorts at US$1.0 billion, and Genm's stakes in Empire Resorts will rise to 76.3%.

Empire Resorts registered total revenue of US$369 million and EBITDA of US$106.1 million in FY2022. To note that Q4FY2022 was strong (after covid) with revenue of US$102 million and EBITDA of US$33 million, locking in an EBITDA margin of 32.3% higher than that of Malaysia (29.4%) and UK (18.0%) gaming business.

Annualising the latest quarterly result will give a projected EBITDA of US$132 million for 2023. So a valuation of US$1.0 billion puts the EV/EBITDA at 1,000/132 = 7.6x.

This is lower than the valuation of Genting Singapore at EV/EBITDA of 8.0x and valuation of Macau casinos at EV/EBITDA of over 20x.

@tonywong8, you are right to point out the higher power consumption in Singapore will likely push up USEP. The peak demand went up to 7,300MW again, not too far away from the previous peak of 7,560MW in July 2021. I expect the peak demand will scale new highs in coming months as economy picks up speed amidst super hot weather.
This is significant as such peak demand must be met during the day even for just a short duration of 30 minutes. Singapore must prepare and have the back-up power generators ready to meet any such power surge during any time in the day on any day. If the peak power demand increases by 300MW from previously 7,000MW to 7,300MW, the power system will need to have at least 110% x 300MW = 330MW of additional power generation capacity in order to maintain a reserve margin of 10%. If the required reserve margin is 20%, then the required additional power generation will be 360MW.

This will ensure power demand to remain high and USEP to remain elevated over the next few quarters until a new generator comes on stream, expected in 1H 2026 the earliest when Keppel new plant may come online.

If written back fully the entire RM1.83 billion impariment provision, Genm will add about 28 sen to its NTA. Who knows if this land has also appreciated in value by 400% in past few years like in the case of its Miami land.

@AdCool, that is a fantastic news!

As long as the land validity issue has been legally settled for the tribe, Genm should be able to write back some or all of the earlier impairment. Whether or not Genm and the Mashpee Wampanaog tribe will proceed with developing a casino at the site is not crucial at the moment, the important thing is that the land validity is legalised and so there is value in the land and any building already built at the site.

@AdCool, thanks. I thought of that promissory notes too. I read a Maybank research report in 2020 that there was a chance for these promissory notes to be written back after Joe Biden became the US president, but things have not seemed to move since.

Any new progress on that front lately?