KUALA LUMPUR (April 16): Analysts are positive on Malaysia’s pilot green power exports to Singapore using existing infrastructure in both countries, following establishment of the platform enabling cross-border trading of green electricity, the Energy Exchange Malaysia (Enegem).

CGS International said the exports — which will commence with a pilot scheme entailing a maiden auction for 100 megawatt (MW) of renewable energy (RE) exports to Singapore — is a key step towards realising the country's energy export potential.

“We see Tenaga [Nasional Bhd] (via grid upgrade requirements) and YTL Power [International Bhd] (via ownership of generation/retail licence in Singapore) as potential key beneficiaries,” it said.

Meanwhile, MIDF Research said while the pilot 100MW export capacity is small, in the longer term, Singapore is looking to import up to 3.5GW of green electricity by 2035.

Separately, Maybank Investment Bank said RE export is potentially a new revenue source via RE sales and wheeling charges, and a capacity growth driver for Malaysia's RE industry, which is currently dependent on domestic large scale solar (LSS) and Corporate Green Power Programme (CGPP) schemes.

Overall, the house remained positive on the RE sector, for which engineering, procurement, construction and commissioning orderbook replenishment is impending from both the 800MW of CGPP and 2GW of LSS5 projects.

CGS International, MIDF and Maybank IB named Tenaga Nasional, and YTL Power as their top picks.

At the time of writing, YTL Power was down 10 sen or 2.6% at RM3.81 while Tenaga shed 14 sen or 1.2% to RM11.46.

Tenaga Nasional

CGS International continues to see Tenaga as a key enabler for the National Energy Transition Roadmap (NETR).

“The stock has done well over the past year, but at current price levels, we believe investors are only valuing the group’s ongoing operations, without ascribing any value to the upside potential from the NETR, particularly from the regulated returns from the projected RM35bn grid upgrades, which we estimate can add RM3.60 to its share price,” it said. The house has an “add” call on the counter with a target price (TP) of RM15.60.

Meanwhile, MIDF expects Tenaga to benefit from grid upgrade requirements in the mid-term, with this hinging on the approved capex for RP4 as well as allowable returns which will be determined towards end-CY2024.

YTL Power

CGS International believes the potential value accretion from YTL Power’s data centre investments has yet to be fully priced in by the market despite its strong share price performance over the past 12 months.

Current share price implies a price to earnings multiple of 10 times on an earnings base that reflects a normalisation of PowerSeraya earnings by FY2026, it added. It has an “add” call on the stock with a TP of RM4.50.

MIDF Research said while news of RE export has been around for a year now, it is keeping a “neutral” call on Utilities, given strong share price performance and stretched valuations.

Nonetheless, the house likes YTL Power (“buy”, TP: RM4.22) for a potential earnings recovery at Wessex Water, expansion into data centres and as a potential beneficiary of LSS5 and RE exports.

On Monday, the Ministry of Energy Transition and Water Transformation (Petra) said the auctioning process for cross-border sales of green electricity shall commence with a 100MW pilot run, utilising existing interconnection between Singapore and Peninsular Malaysia via Enegem.

Enegem, established for cross-border green electricity sales to neighbouring countries, supports regional power integration via the Asean Power Grid Initiative.