But again, I do not know how much profit was contributed by Keppel's 1300MW CCGT in Singapore and how much was from its renewable energy assets. So I cannot use the figure of SGD400m for Keppel's 2H profit to calculate the same for PowerSeraya.

@cgtan2020, yes that was good profit for a 1300MW of CCGT plus other renewable energy assets of Keppel. PowerSeraya has effective 2,000MW of CCGTs in Singapore, some 50% higher than Keppel's current CCGT capacity in Singapore.

@cgtan2020, thanks for the Keppel presentation. Some comments below:

Its infrastructure segment contributed the bulk of the earnings at SGD699m for FY2023, up 135% from FY2022. Keppel has quite a big portion of renewable energy assets and only 1,300 MW of CCGT in Singapore, but the latter contributed the bulk of the infrastructure earnings as some renewable energy (i.e. wind power) assets typically generate little profits.

The new 600MW hydrogen-ready cogen plant of Keppel is under construction, 35% completed as of Dec 2023. Of note is that Keppel has secured a multi-year PPA with GlobalFoundries for 150-180MW of electricity supply per year, this means that Keppel will have 150-180MW of less electricity supply to be offered to the retails market as it has opted for a long term contract with a big industrial client.

In the presentation, Keppel said its data centre REIT was valued at SGD3.6 billion for a portfolio of 300MW data centres, this is inline with the valuation used by Hong Leong analyst to estimate the value for YTLP's 150MW data centres, i.e. SGD3.6b x 150/300 = SGD1.8b = RM6.3 billion.

@xiaochen, I would expect so. If there is no other provision or one-off impairment, I would expect YTLP net profit to beat 10 sen per share for the Dec 2023 quarter.

Keppel's excellent quarterly results for Dec 2023 quarter will give a hint on how PowerSeraya performed in the quarter. Should be as good as the Sept quarter.

To YTL Power, it is not in any hurry to grab customers for its AI data centre with cheap offers, as it will only spend big capex on purchasing Nvidia H100 GPUs only after it secures a client to take up space at its Kulai site.

The original land purchase cost is already sunk in, no big deal it was just some RM450 million which can be recouped from the initial phases of traditional data centre with SEA Group.

The other basic infrastructure has been built by associated construction company within YTL group so you can bet the construction cost is very competitive.

Hence, once YTLP secures a client for the AI data centre, we can expect the profit margin will be very good, and EBITDA margin can be as high as 60% as forecast by RHB / CLSA analysts

Of course, Singtel move will create some competition to YTL Power in getting clients for its AI data centres, but I think the pie is big enough for both players to grow big.

In any event, Singapore has limited new data centre capacity to 50MW every year, which means Singtel will have to compete with other Singapore players for this 50MW quota every year.

Yes cgtan2020. PowerSeraya would be able to earn some carbon credits too!

@ltlim74, this new development does not have impact on YTL Power. It only shows that AI data centre is the way forward, even Singtel is upgrading its old data centres to AI enabled data centre. Nvidia is so big that it won't put all eggs with YTL Power only in its data centre business in Asia, remember Nvidia boss Jensen Huang also visited Singapore last month before he met up with YTLP MD in KL.

The subsea cable is different thing, this is more of a fibre cable for internet connectivity. The subsea cable I mentioned above was for power transmission from Sarawak to Singapore.

@cgtan2020, it is best explained using an example.

Say at current market prices of LNG and Singapore electricity prices of SGD 200/MWh, the fuel cost portion is about SGD140/MWh and hence the non-fuel margin is SGD60/MWh. This non-fuel margin is the gross profit margin of PowerSeraya for power generation after deducting the fuel costs.

Say at current liquid hydrogen prices, the fuel cost of CCGT generation is SGD180/MWh, so at electricity price of SGD200/MWh, the non-fuel margin for a CCGT using 100% hydrogen will be just SGD20/MWh.

However, the situation will change when crude oil and LNG prices shoot up. Let say LNG prices shoot up by 20%, so fuel cost for a CCGT burning 100% LNG will increase to SGD140/MWh x 1.20 = SGD168/MWh, so typically gencos will increase electricity selling price by the same amount to SGD228/MWh in order to preserve a gross margin of SGD60/MWh.

Now if a CCGT switches to 100% hydrogen burning, its fuel cost remains at SGD180/MWh, but the gross margin will double up to SGD48/MWh at the new electricity selling price of SGD228/MWh.

What if the hydrogen price gets cheaper with the bigger production from Sarawak? Let say if hydrogen price gets 10% cheaper, then the fuel cost for CCGT buring 100% hydrogen will reduce to SGD162/MWh, then its gross margin will get a lift of SGD18/MWh to SGD66/MWh or tripling up from the original SGD20/MWh.

Hope this explains.

Calvin, you are wrong on this. This is potentially good news to YTL Power on two fronts:

1) Firstly, Sarawak will be one of the places for the cheapest production of green hydrogen. As the state ramps up investments in green hydrogen production, it may be just in time for PowerSeraya's new 600MW hydrogen-ready CCGT to use such low-cost green hydrogen by from 2030. As explained, when crude oil and LNG prices are high, PowerSeraya will have a choice to co-mingle higher portion of green hydrogen with LNG to generate electricity at lower costs and enjoy higher gross margin.

2) The news says Singapore would fund the undersea power cable from Sarawak to Singapore for RE export from 2032. This development may be faster than for Tenaga to build a new 1,000MW inter-connection with Singapore from Johor, as Tenaga is cash tight. So this will promote faster RE export from Sarawak to Singapore than from Peninsular to Singapore (which Tenaga is trying to play it to its advantage), and there is less politics involved in such a deal, more based on merits so YTLP would stand a bigger chance to secure part of such RE export from Sarawak.

Hyflux failed due to its inexperience in power generation as it branched out from its water treatment business. Its power plant in Singapore has since been bought over by PowerSeraya at a cost lower than the original building costs of Hyflux. That shows the brilliance of YTL Power management in scooping up quality assets at a bargain price.

This new CCGT plant of Hyflux has been contributing good profits to PowerSeraya since the completion of acquisition last year, and PowerSeraya is on track to recoup the investment cost in Hyflux asset within 3 years.

Thank you Calvin for highlighting this timely acquisition by YTL group.

@Raymond Tiruchelvam, that is just a ballpark valuation using 10x PER.

It is very subjective as to how much PER to use for a certain stock. Generally investors give high PER to stocks with defensive earnings and steady dividends but little growth, such as Nestle and Dutch Lady with PER of over 30x and dividend yield around 3%.

Investors also give high PER to high growth stocks like tech stocks, some of which enjoy PER of 25x to 30x, as they think a 20% growth in earnings p.a. will lower the PER to 20x then 16x in 2 years.

Long term PE ratio band for S&P500 stocks in the US is around 15x.

If YTLP last quarterly earnings can sustain for the next 3 quarters, full year EPS will be 41.88 sen as per your calculation above. To give a 10x PER to YTLP is on the conservative side, as its earnings have grown by triple digit and are set to grow by double digits in next few years. It should enjoy a PER of 15x or more. Its peers Tenaga is trading at 17x to 18x PER, Malakoff is loss making in past 1-2 years.

The issue is that most local analysts have missed out on this stock last year and hence are catching up with upgrades, but most think that YTLP earnings have peaked, as can be seen in their earnings projections dropping from RM2.8b in FY2024 to RM2.5-2.6b in FY2025 then to RM2.3-2.5b in FY2026 then worse to RM2.1-2.2b in FY2027. When investors see the reducing earnings projection, they may not want to give a high PER to YTLP. That's the trick used by analysts to lower a target price for a stock, another trick is to use sum-of-parts valuation rather than PER. For example, Maybank still has a target price of RM2.70 for YTL Power even though it forecast EPS of 38 sen for FY2024, effectively giving a PER of just 7.1x. How would you justify that?

But I think once PowerSeraya beats their earnings estimate every quarter by quarter, eventually these local analysts will get convinced that the earnings will sustain well into 2026 and YTL Power overall profits will grow from FY2024 to FY2026 instead of reducing, then investors will be willing to give a higher PER of 12x to 15x.

Another factor is market sentiment. If foreign funds continue pouring in on political stability, and especially if YTL and YTL Power both are included in MSCI on 13 Feb, then we can see more foreign funds buying in and these funds have their own research team or rely more on foreign research house reports like from CLSA or Macquarie, rather than looking at any of these local analysts' report, then the market will give a higher PER of 12.5x to YTLP.

And foreign funds are quick in response to any news development, as can be seen today price actions where over 50 million shares were traded and stock price closed high, indicating foreign funds buying. This was good response to the news of PowerSeraya clinching a new 600MW hydrogen-ready CCGT project. You see none of the local analysts commented on this news, as they are either not able to make any sensible earnings projection for the new unit or have other agenda.

So far, only Hong Leong's Daniel Wong and RHB Sean Lim have given non-biased reports on YTL Power, who gave reasonable assumptions to justify their valuation method. The rest are mostly conflicted, I feel.

If such sentiment persists, even thought YTLP continues to grow profits year in year out to 58 sen or 75 sen per share, I am afraid the market and these local analysts will be willing to give a 10x PER only. If we are lucky, we may see it trading up to 12.5x PER. Anything above is jackpot to me.

@kytan, good for you winning on two fronts!!

I also adopt similar strategy as yours, bought some call warrants and will progressively sell off the call warrants towards the expiry date and hold onto mother shares for dividends and long term capital appreciation

@Permutation, it is difficult to pitch a target price for the next 12 months as things are happening fast on the ground. I will just try to forecast how YTLP earnings may look like in next 12-36 months when most of the new projects will have started operational.

PowerSeraya earnings should continue to be strong till 2026 at least with net profit in the range of SGD700 - 900 million a year or RM2.5b - RM3.1b.

Wessex shall turn around from FY2025 onwards with expected earnings of 4.5b x 3% = 135 million pounds minus some 35m pounds as provision for index linked bonds, hence net profit may come to around 100 million pounds or RM600 million. For FY2026, net profit will get a bigger jump as Wessex will enter the next 5-year regulatory period with a bigger capex plan and hopefully higher WACC to reflect the higher interest rate environment, hence I made a rough forecast as 5.0b x 3.3% = 165m - 35m (for ILBs) = 130 million pounds or RM780 million. Then every year thereafter, net profit will get bigger by RM100 million to reflect the bigger RCV each year. So it may well make a net profit of RM1.0 billion by FY2028.

Jordan power once its arbitration case is settled will contribute net profit of RM500-600 million a year for the next 30 + 10 years, increasing over time as project loan gets gradually pared down and interest expenses come down to zero in 12-15 years.

Yes 5G should break even in FY2024 and contribute some earnings, earlier estimated to be RM100-200 million a year on conservative subscribers projection.

Digital bank will start in 2H 2024 and hopefully break even in 3 years.

Data centre earnings contribution is rather hard to predict as not much info is available. I will just rely on RHB analyst's projection but tag a higher IRR of 15%, so forecast a net profit of USD150-180 million a year once the full 100MW AI data centre is fully developed. That will be RM700 - 850 million of net profit contribution a year.

WTE project may contribute profits of RM300-400 million a year for a capex of RM4.5 billion at IRR of mid teens.

This new 600MW hydrogen-ready CCGT at PowerSeraya will contribute gross margin of at least SGD200 million a year from 2028.

We can expect YTLPower net profit to range from RM4.7 billion to RM6.1 billion a year once all these projects start operational in next 3 years and will jump by another SGD200m or RM700m once PowerSeraya's new 600MW hydrogen-ready CCGT kicks in from 2028.

That is EPS of 58 sen to 75 sen jumping to 83 sen from 2028.

Applying a PER of 10x to the lowest earnings projection, I get a fair value of RM5.80.

Applying the past-years average PER of 12.5x, I get a top range of 12.5x RM0.75 = RM9.30.

As each project is commissioned and new earnings stream kicks in, YTLP will get re-rated gradually to RM5.80 - RM9.30 over next 12-36 months, I hope.

@cgtan2020, I think a private placement with free warrants or just issuance of free warrants to YTLP holders is likely. It will be an easy avenue to raise cash to fund the company capex over next 5 years as more warrant holders convert into mother shares.

The advantage that YTL Power has over other data centre players is that it has tied up with Nvidia and has access to its H100 GPUs which are in high demand in the market. Not all data centre players can get big amount of GPU chips to power their data centre.

@jeffchan1901, many parties are looking to venture into data centre business as this is the growth sector to get into in next few years. I think the demand for new data centres in the region over next few years is big enough to accommodate new players like TM. Don't forget some players will get out when the asset matures, just like TimeDotCom sold off its stakes in a data centre company last year.

Some comments on the latest Ambank upgrade report:

1) A lot of focus is put on YTLP's data centre business, notably a very good valuation of RM8.2b to RM10.6b for 35MW of AI data centre. Huey Ling justified the valuation by referring to the current valuation of an equivalent 70MW data centre of CoreWeave in the US (and attaching a 50% discount) and the market value of the number of Nvidia H100 GPUs required for a 35MW AI data centre. I am not expert on this but I did check online last month that a Nvidia GPU could cost RM200k a piece, and Huey Ling did assume about the same cost. The good thing is that this is the valuation for just 35MW of AI data centre, as YTLP secures more data centre jobs to fill up its 500MW data centre park in Kulai, the total valuation for YTLP data centre business may triple or quadrable.

2) PowerSeraya is valued at just SGD5.5 billion, on the low side to me. I see that her earnings projection for YTLP also comes down in FY2025 and FY2026, indicating that she was still looking at some sort of "normalisation" in PowerSeraya earnings after FY2024. This is okay to me, and it leaves room for further upgrade when PowerSeraya handsomely beats the forecast next year.

3) Wessex is valued at 1.23x RCV, better than that from RHB (1.03x RCV) but lower than Hong Leong's 1.4x RCV. She was on the conservative side as Wessex earnings have not picked up yet. It may take some time probably another month or 2 when Wessex announces the next round of water tariff hike for the year starting 1st April 2024, then I think the market will give higher value to Wessex when they see the earnings rebound

4) Jordan Attarat Power is valued at just USD283 million, way lower than others' estimates. This is even lower than a typical valuation even assuming half the PPA payments. This looks like more of the cost of investment, a little too conservative.

5) Jawa Power, Yes, Ranhill stakes are valued at net asset value, and are relatively smaller so no comment here

@sypher @cgtan2020 thanks for the pdf files!

Can anyone share the pdf file of Ambank upgrade report on YTLP?

The current effective capacity (i.e. the efficient gas-fired power plants) of PowerSeraya is about 2,000MW. Hence this new 600MW hydrogen-ready CCGT unit will increase effective capacity of PowerSeraya by 30%.

Rough calculations show that this new 600MW unit alone may add gross profit of at least SGD200 million a year to PowerSeraya once operational from end 2027. It is initially ready for 30% mix with hydrogen, and may be expanded to 100% hydrogen in the future when green hydrogen cost becomes cheaper than natural gas cost. Then gross profit might double or triple up when crude oil and LNG prices are high.

Please refer to my article below for more details and the table on electricity supply demand projection for Singapore

https://klse.i3investor.com/web/blog/detail/dragon328/2023-11-23-story-h-214219881-YTL_YTL_Power_Multiple_Growth_Engines_Firing_up

As per what I wrote in Nov 2023 (extracts below), Singapore electricity supply will be tight well into 2030. The speed of EMA awarding this RFP (within 4 weeks of RFP submission close in end Dec 2023) tells of the urgency of having new capacity on stream.


Next in 2026, a new 600MW cogen plant by Keppel is expected to commence operations followed by another 600MW cogen plant by Sembcorp. These will hardly be enough to cater to the projected peak demand growth from 8,100MW in June 2023 to 9,493MW in June 2026 (based on EMA projection). The power system reserve margin is projected to drop to sub-30% levels for the next 10 years from FY2024 to FY2033 as shown in the table below:




The peak demand figures above are all based on EMA projection. Total generating capacity is gross capacity figure (before allowing for plant internal consumption and spinning reserves). The projected new generating capacity addition is assumed to be:

· 680MW OCGTs by EMA in 2025

· 600MW cogen by Keppel in 1H 2026

· 600MW cogen by Sembcorp in 2H 2026

· 600MW 1st CCGT under EMA RFP in 2028

Really great news for YTL Power!!

That's why I said earlier that foreign funds knew something we didn't, now at least there is this good news coming

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

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

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

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

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

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

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

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

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

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

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

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

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

Correct @Bullstocks888.

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

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

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

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

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

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

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

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

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

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

https://theedgemalaysia.com/node/698685

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

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

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

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

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

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

Genting Singapore share price shoots past SGD1.00 again today

haha I am still in YTL YTLPower Genting and now PBA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

@moncmondo87, thanks for the file by CLSA

@moncmondo87, can share the link for CLSA report?

@cgtan2020, no, not based on this news link

KingKKK has his own calculations

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

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

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

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

Thanks to KingKKK for highlighting this stock last week

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

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

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

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

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

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

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

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

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

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