KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research in a note today said YTL Corporation Bhd's share price is undervalued at around RM2.71 a share currently, tagging a fair value fo RM3.33 a share to the company.

It said key catalysts for the stock include YTL Power International Bhd's utilities business in sustaining SerayaPower & Attarat Power Company (APCO) earnings, turnaround of Wessex and new growth from data center (DC) development; its construction business from both external (including high-speed rail and MRT3 and internal projects (e.g. data centre and large scale solar); and cement, with continued strong demand from current projects and upcoming mega projects in the pipeline.

YTL Power, in which YTL holds a 55.6 per cent stake, has consistently posted robust earnings in recent quarters, largely driven by YTL PowerSeraya.

"The stability of Singapore's retail electricity prices amid a tight demand-supply scenario, coupled with steady gas prices benchmarked to Brent crude oil, has bolstered margins."

Jordan APCO's contribution has also been stable at RM70-80 million a quarter since commencement in 1QFY24 and is expected to rise yearly as debts are pared down over the years," said the research house.

Furthermore, the company eyes fresh avenues for expansion through the development of data centers (DC) and the ramp-up of its Large Scale Solar (LSS) initiatives.

In the construction arena, YTL is strategically positioned to reap rewards from both external dynamics like the High-Speed Rail (HSR) and Mass Rapid Transit 3 (MRT3) projects, alongside internal ventures such as data centers and LSS initiatives.

In the cement segment, YTL expects a surge in demand propelled by ongoing projects and the anticipation of lucrative mega projects in the pipeline.

YTL Corp is also diversifying its portfolio through the exploration of new business segments, where the company plans to establish a green data center with a substantial capacity of 500MW over the next decade.

YTL is collaborating with NVidia to develop an AI data center, referred to as AI-DC, with an estimated capacity of 100MW under its YTLCom arm.

Additionally, it is also making significant strides in renewable energy ventures, aiming to establish 500MW of Large Scale Solar (LSS) capacity to complement its green-powered data center operations.

"Since our first report in Sep-2023, YTL has delivered strong earnings performance in recent quarters with share price run-up above our initial fair value."We remain upbeat on YTL's outlook and we have revised upwards our fair value to RM3.33 (from RM2.10) based on Sum-of-Parts valuation," it said in a note today.

https://www.nst.com.my/business/corporate/2024/04/1042334/hlib-research-says-ytl-corps-stock-undervalued-fair-value-rm333