3. Utilities are long term assets and provide long term stable returns, you do not expect a utility company to give you 10x returns in short period of time. But if you have patience, buy one at a dsicount and hold them long enough then sell it off at a premium at the right time, they can give you many many times returns. YTLPI just did that with Electranet with 25x returns of equity money in 20 years. But now we are talking about a share price of a stock that may go up 5x to 10x in 2-3 years. There are many examples recently. In Bursa, Yinson went up from RM0.30 in Mar 2013 to RM3.50 in July 2019, giving investors 11x returns in 6 years. It is also in a business with huge capex but with the right investment decisions, Yinson managed to bag lucrative contracts to grow big. DNex share price shot up from RM0.20 in Jan 2021 to RM1.33 in Feb 2022, giving a 6.5x returns in just one year. Hibiscus share price increased from a low of RM0.24 in Mar 2020 to RM1.38 in Mar 2022, a 5.7x increase in 2 years. Hibiscus may become a 10x bagger if it continues going up another 50% as oil prices remain hign above USD100 per bbl.

2. Yes utilities business has high stability and requires high capex for maintenance and expansion. As in the case of Wessex being a regulated business, high capex is a good thing as it will increase its regulated asset base (RAB) faster and the water tariffs there depend on RAB multipled by the agreed WACC to provide a fixed return to water companies. Yes, Hyflux went burst as it entered into power generation business at the wrong time when the electricity market was entering an over supply situation. It is a cyclic business there with merchant electricity market, I believe Hyflux decided to go into power generation (away from its water business) due to the high power generation margin before 2013 but it was not aware of how bad the over supply situation might get it into trouble. Again it all comes back to the management capability and its investment strategy to see if an investment goes well or goes burst. YTL Power bought into PowerSeraya at a bargain just after Lehman's Brothers collapsed so Temasek was willing to sell. At good times like 2005-2007, no one would sell a controlling stake at a bargain. Again, YTL Power is buying over Hyflux at a discount to its asset, and at a price even cheaper than building a new power plant. You need to wait patiently for such an opportunity to scoop up good assets at a bargain price. If you read carefully what I wrote in the article, for this investment in PowerSeraya, YTL Power had long time ago taken back all its equity money, leaving some debts pushed down to the asset level.

Philip, you are a veteran investors and a veteran in i3 forum and I am just a small investor trying to make some money from hardwork research. I will try to reply to your points:
1. Yes telco is a high capital business and DIGI, Celcom and Maxis have spent a lot to get to the positions they are in now. If YTL Comms tried to spend the same amount of capex to penetrate the market held by these telcos, it would be a suicide. But now the game has changed. The market is coming to 5G era and the good thing is that DNS is going to spend the heavy capex to build the 5G network and each telco just pays the equal access fee to roll out the 5G business. The telcos have a choice to subscribe for some equity in the network owner but it is not mandatory. The 5G pie is huge enough to accommodate 5 players and how much market share each can get will depend on their marketing effort and return expectation. I do not see it a big difficulty for YTL Comms to get a 15% market share out of 5 service providers. The fact shows that it is a high margin business with DIGI EBITDA margin at 50% in past few years.

Sslee, I have read what you wrote about Insas and how undervalued it was. I did buy some Insas but unfortunately the timing of entry was not right and now I get stuck in it. If I had a fixed monthly income like yourself, I would also slowly accumulate good stocks like YTL Power and enjoy the multiyear expansion rewards and steady dividends, unfortunately I do not have a fixed monthly income. I have to put in money earned from investment to buy stocks like Insas and YTL Power, and most people want their investments to return positive gains as soon as possible.

Sslee, why do you think Kook Yew Yin keeps promoting steel counters and Leno and yourself promoting Insas?

Furthermore, electricity market in Singapore is cyclic and YTLPower has managed to recoup all equity investment before the market entered into over-supply situation and weathered through the long period of low margins from 2014 to 2020, now entering a margin expansion phase in next few years. There is a real possibility for PowerSeraya to earn over SGD 300 million a year again just like it did in 2007-2012. Just imagine if it does, then PowerSeraya will be able to pare down borrowings to near zero in next 5 years and this investment is all free. YTLPI's next generation and next next generations will be able to enjoy the fruits of investment for many more years to come.

The investment in PowerSeraya was a huge success, contrary to most belief. What I know is that YTL Power has recouped all its equity money put in this SGD3.8 billion deal to acquire 100% stakes in PowerSeraya during the few years when generation margin was good in 2009-2012. Just imagine that an equity money of more than SGD1.1 billion was gotten back within 3-4 years and debts at PowerSeraya reduced by few hundred million dollars. Now left is still 100% stakes in PowerSeraya that is the second largest power plant in Singapore. You need to know that power generation licence in Singapore is very very hard to get, even harder than getting an IPP licence in Malaysia. An IPP licence in Malaysia may last just 21 years but a generating licence in Singapore lasts forever.

It is an unfair statement that the management of YTLPI has many failed project like Singapore operations. It is true that they had not been able to find good deals since 2009 when interest rates were pressed to near zero and asset value was inflated. I would rather wait for the right opportunity too strike rather than buta-buta chasing high asset value with single-digit returns.

ValueInvestor888, true that Singapore government is smart and they were very smart in 2013 when they brought in LNG into Singapore market and crashed the elctricity supply market pricing. But the utilities companies in Singapore have been taken over by international investors like YTL Power and China / Japanese owners, and they are not stxpid. All have learnt the mistake of signing up too much LNG in 2013 and suffered poor generation margin from 2014-2020, and they will not make the same mistake twice next year.

Lastly for future projects, interest costs and costs of doing new projects will be higher as interest rates move higher, but this disadvantage is felt by everyone else so it will not impede YTLPI's advantage in securing good lucrative projects like the green data centre deals or power export to Singapore.

Thirdly for PowerSeraya existing loans, interest costs will be higher as interest rates move up. This will be a strong reason for YTLPI to list up a portion of PowerSeraya stakes and raise money to pare down its borrowings.

Secondly for existing loans already secured under Wessex or to be secured for its capex expansion plan, the liquidity in the UK is huge and any interest rate movement will be taken care of by the water tariffs that always reflect cost of debts and level of gearing. For you info, the water tariffs for every 5 years will be set higher when interest rates are seen moving up to properly remunerate the 10 water companies in the UK for spending capex to maintain or upgrade the water assets there.

Higher interest rates may not have direct impact on its profits going forward. Firstly for existing project like Jordan power plant, financing is secured on project financing basis ring fenced to the project company level based on a fixed margin over LIBOR or similar. Typically the project company will enter into interest rate swaps to protect itself from interest rate fluctuations over the tenor of the project financing.

Multiple re-rating factors coming soon

https://klse.i3investor.com/web/blog/detail/dragon328/2022-04-22-story-h1621549755-YTL_Power_is_potentially_a_10x_Bagger

EPF needs cash for latest round of withdrawal by members up to RM10k each or estimated RM30-50 billion cash

With economic activities almost fully re-opened, YTL's construction and cement division may soon be becoming the largest profit contributor to the group.

With JB_Gemas multi-billion double track rail project well on track, construction division will contribute substantial earnings over next 2 years.

With the recent hikes in cement prices and full consolidation of YTL Cement into Malayan Cement that controls over 68% of Malaysia cement market share, the cement division will take off in coming months with few hundreds of million of profits in 2H2022.

YTL Power is currently enjoying a powerful re-rating which may take its share price doubling to RM1.50. If that happens, it will add another 30 sen of value to YTL's valuation.

Longer term prospects may include the revived KL-Singapore High Speed Rail project which it clinched the southern portion earlier before it was suspended, and a bigger high speed rail project linking KL to Thailand which may cost close to RM100 billion.

In terms of earnings prospect, it is certainly looking up for YTL this year. YTL Power earnings have bottomed up with Wessex & PowerSeraya contributing steady earnings and new projects coming up (Jordan power plant, solar farm, data centre, power export to Singapore, etc).

Cement division is looking even better with the recent hikes in cement prices in Dec 2021 from RM200-210 to RM270 per tonne, YTL's 77%-owned MCement may rake in net profit of almost RM1.0 billion for 2022 if cement prices stay at RM270-280 per tonne throughout the year.

Digital bank licence is a feather to the cap. YTL Corp is already very undervalued.

Its stakes in listed subsidiaries (YTL Power, MCement, YTL Hosp REIT and Starhill Global REIT) is already worth more than 70 sen per share. Minus nett debt of RM945m at holding company level, YTL is worth at least RM0.70 - 0.09 = RM0.61 per share.

At current share price of RM0.62, you are getting all its unlisted assets for free! The unlisted assets include YTL e-solutions, ERL, construction arm and Niseko landbank (itself worth 44 sen at market value).

A quick way to realise the value of Wessex is to list it up in London stock exchange by selling away say 30% stakes. Then YTLPower would get immediate cash of RM5.2 billion while retaining 70% control over Wessex that will have a market capitalisation of RM17.48 billion.

Did he mean that if we apply the same 1.6 times RCAB for Electranet on Wessex, we shall get an enterprise value of RM30.43 billion for Wessex?

If this is so, then the equity value of Wessex shall be RM30.43b - RM12.95b = RM17.48 billion or RM2.13 per share of YTLPower.

As MIDF pointed out in its report today, YTLPI disposed Electranet at a good premium of 1.6x regulated asset base. MIDF sees great value in its 100%-owned Wessex Waters that has a regulated asset base of RM19 billion. MIDF estimates an equity value of RM13 billion for Wessex, or RM1.58 per YTLPI share. An estimated equity value of RM13 billion plus debts of about RM13 billion at Wessex company level, valuing it at enterprise value of RM26 billion or 1.37x RAB.

Should we value Wessex at 1.6x RAB as in the case of Electranet, Wessex would be valued at RM30 billion and YTLPI's equity value in Wessex would be worth RM30 -13 = RM17 billion or RM2.07 per share.

You can run now and get few sen profit and wait for better entry price, or you may lose out bigger gains once profit taking is over.

This company is in mega infrastructure projects that take time to take off, and it owns perpetual regulated assets that always appreciate in value over time.

Right, MS made a mistake before by buying Media high at RM1.00 or above, now making another by selling low. It may continue selling 1.0-1.5 million shares per day as share price stays above 60 sen for another 2 months then its stake will become insignificant.

@choysun, we cannot read the article that needs subscription. Could you copy and paste the relevant paragraphs here?

@Faridfet, which research house announced a target price of RM2.90 for AEON?

@faridfet, this sounds good to me. Aeon management should set KPIs to be achieved for this amount of money spent, eg. sales increase for certain products or certain improvement in inventory control and hence cashflows.

The big block of 1.0 million shares blocking at 1.57 has been snapped up this morning. Today is the last day for calculating the settlement price for AEON-C10, so it does not matter if AEON share price shoots above RM1.60 today as the average for last 5 days will be less than RM1.60 and CIMB has succeeded in getting a zero settlement for the C10 call warrants it issued.

after today, there is no more reason for CIMB to block AEON from going higher. Incidentally, Maybank IB this morning issued a technical Buy on AEON with short term tp 1.65 then 1.79.

AEON share price dipped to 1.46 low yesterday on weak market sentiment but has since rebounded to challenge month high of 1.56.

These has been a big seller of over 1.0 million shares queued at 1.57 everyday in past few days. I suspect this seller is CIMB IB who issues the call warrant AEON-C10 that expires on 31 March. CIMB IB has all its reason to block AEON share price from reaching 1.60 so that it will not need to pay a single sen to settle all the call warrants C10 it has issued. Very wicked intention.

He mentioned that AEON has spent close to RM10 million installing solar panels at Taman Maluri and Alpha Angle malls. This would be for about 4.0 MW of solar power and would save abour RM2.9 million of electricity costs per year.

It is capex well spent as AEON would recoup investments within 3 years after incorporating green tax incentives.

Just imagine if AEON were to spend another RM100m capex to install solar panels in other 20 malls, it would save RM29 million of electricity costs every year for the next 25 years. This would raise earnings by 2.0 sen per share every year.

I particularly like the AEON Sayap Bagimu sustainability initiative mentioned by the CEO. Shafie says AEON brought in 400 suppliers comprising small enterprises in 2021. This is very smart and a win-win strategy, providing a platform for small enterprises to multiply their sales and at the same time broadening product offering especially local quality products and increasing sales for AEON.

This indirectly reinforces AEON's status as a community mall, supporting local small enterprises around and providing more product choices to the local community.

He was optimistic of AEON's prospects for 2022 with the gradual reopening of the economy. He noted that AEON non-essential businesses were closed for 119 days in 2021.

With the omicron wave coming to an end and no more MCO in vicinity, there is no reason why AEON will not perform better this year than 2021.

In last Saturday interview with The Star paper, AEON's CEO stated that the planned capex of RM200-250m for 2022 would include capex for a new departmental store. He also mentioned that the company has installed solar panels in Tmn Maluri AEON mall and would consider installing solar panels at other 30 malls that it owns.

I consider this amount of capex to be reasonable for good capital investment programs like roof-top solar panels and a new departmental store (instead of a more expensive new shopping mall).

As seen before in 2021, Morgan Stanley would not sell Media below RM0.60. Good chance to collect!

Even if we do not look at SOP valuation but look at cash flow valuation, it points to the same fact that YTLPI is grossly under valued at 67 sen.

Maybank projected operational cash flows of about RM2.5 billion per year for YTLPI in next 2 years. If we exclude expansion capex for a moment (i.e. if we assume YTLPI would not expand into any new venture that requires big capex), its free cash flows would top RM1.6 billion or 20 sen per share.

It would easily be able to declare dividends up to 7 sen or 10 sen per share every year in steady states with current asset. At 5% dividend yields, YTLPI should be valued at RM1.50 to RM2.00 per share.

Using estimates above, YTLPI should be worth additional 21 sen from Wessex and 40 sen for PowerSeraya.

This would take its SOP valuation from 90 sen to RM1.51 per share.

If we look at cash flows valuation of PowerSeraya, it should be worth at minimum price-to-FCF of 20x (or 5% dividend yield). Using Maybank projected earnings of RM200m from PowerSeraya, it should be worth at least RM4.0 billion or 48 sen per share of YTLPI.

Another crazy thing in Maybank's SOP valuation is that it did not ascribe any value to PowerSeraya, the second largest power company in Singapore.

While Maybank itseld projected that PowerSeraya would contribute RM196m to RM250m per year to YTLPI, it makes no sense to attach a zero value to the company.

While PowerSeraya is not a regulated asset, it still owns substantial power generation assets, land, oil tanks and more importantly a limited generation licence in Singapore. At the worst, PowerSeraya should be valued at cost or at least SGD3.0 billion. Minus out estimated debts of RM5.8bn at PowerSeraya, it should be worth RM9.0bn - RM5.8bn = RM3.2 bn or 40 sen per share of YTLPI.

Maybank IB iteself projected earnings contribution of about RM360 million from Wessex to YTLPI. How could Wessex be valued at just RM3,587m or 10x earnings or 10%-12% dividend yields for a top-notched regulated asset in a low interest environment of 1% in the UK?

The sale of Electranet at below 2% dividend yields has proven that such regulated asset should be valued at max 5% dividend yield.

As such Wessex should be valued at minimum RM7.0 billion or 88 sen per YTLPI share. This would actually just value Wessex at a 1.09x RAB.

Local analysts here do not know how to value regulated assets and do not appreciate how valuable such perpectual regulated assets are.

In Maybank's SOP valuation of YTLPI, it attached a value of RM3,587 million to Wessex. I think this is grossly under valuation of Wessex business.

Wessex has a RAB of GBP3.36 billion or RM19.3 billion as of 30 June 2021 and Maybank's estimated debts at Wessex at Jun 2021 was RM14.00 billion. If Wessex is valued at 1.0x RAB, then the equity value of Wessex would be RM19.3 bn - RM14.0 bn = RM5.3 billion or 65 sen per YTLPI share.

This would be at least 21 sen higher than Maybank's estimated value of 44 sen.

This raised its nett cash level in holding company to RM1.90 billion or 23 sen per share. This cash shall come in handy when YTLPI continues to pursue long lasting profitable new ventures like setting up solar power plants and data centres.

The more important thing is value and cash flows. Maybank IB just upgraded YTLPI target price to RM0.90 after YTLPI completed the disposal of Electranet and received RM3.0 billion cash.

It was a big mistake for EPF to sell YTLPI below RM0.60 and now it is buying back above RM0.60. It is like the case of Astro too, EPF was selling at RM0.97 and now buying back above RM1.00. It bought lots of glove stocks few months back then was seen selling off slowly over past few months. I will not read too much into EPF trading pattern.

Furthermore, Bplant is generous with dividend payouts. It paid out total 8.4 sen of dividends in 2021. With CPO prices hovering above RM6,000 per tonne, Bplant is expected to record higher profits and declare dividends over 10 sen in 2022.

One more advantage BPlant has over other planters is that all of Bplant's plantation land is located in Malaysia, none in Indonesia. This makes a big difference as the realised CPO sale price from Malaysia is close to market price RM6000+ per tonne while palm oil export from Indonesia will be subject to maximum USD575 (or RM2,300) per tonne of export duty & levy

Bplant also seldom sells forward so it benefits maximum from current high spot prices of CPO.

With edible oil supply becoming very tight and suitable plantation land limited, palm oil estate land will become very much more valuable in future. Plantation land will be worth easily RM70,000 per ha as people scramble for land.

If Bplant 65k ha planted land is revalued to RM70k per ha, then it will be worth 65k x RM70k = RM4.55 billion or RM2.03 per share.

Plus the market value surplus of its 9700ha land near township, Bplant should be worth RM2.03 + RM0.90 = RM2.93 minimum

BPlant is one of the cheapest plantation stock in Bursa. It has over 65,000 ha of planted palm oil estates, now valued at just RM35k/ha or 35 sen psf.

It also has 9,700 ha of estate land nearby town which could be monetised at much higher price than normal plantation land. These land plots are valued at just RM893m or RM91.7k per ha or RM0.85 psf in book value. Recall that Bplant sold off its 664ha of land in Kulai for RM429 million or RM646,084 per ha or RM6.46 psf. Assuming that Bplant can monetise these land parcels at half the valuation or RM300k per ha, this 9700ha land will be worth RM2.91 billion or RM1.30 per Bplant share. This would add RM0.90 to its book value.

Now Bplant current book value is already RM1.31 per share and would increase to RM2.21 if the 9700ha land is monetised or revalued to market value.

Shareholders of AEON have been suffering in declining earnings and depressed share price since 2012 for the over spending in past few years. For 10 LONG YEARS, shareholders have been suffering enough.

For no new mall addition, if the management is asking shareholders for RM200m-300m of money every year, I would tell them to go fly kite.

If the CEO is asking for capex allocation of RM200-300m p.a. for the next 2-3 years, he must deliver better earnings for the next 3-5 years. DO not just ask money from shareholders but under deliver.

If AEON has its debts exceeding RM600m again by year end and fails to deliver over RM100m in net profit for FY2022, he must go. No more excuses. Simple as that.