HLBank Research Highlights

YTL Power International - Powering Up FY23

Publish date: Fri, 24 Feb 2023, 09:13 AM
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This blog publishes research reports from Hong Leong Investment Bank

YTLP reported a solid core PATMI of RM328.7m for 2QFY23 (+1.1x QoQ, +12.4x YoY), bringing 1HFY23 to RM483.2m (+2.8x YoY), attributed to the strong recovery of Singapore Seraya Power operation. The results were above HLIB FY23 forecast (88.6%) and consensus (114.2%). We expect sustainable Singapore Seraya performance in FY23 and further boosted by UK Wessex Water in FY24. Raised FY23-25f earnings by 15-30%. Maintain BUY with a higher TP: RM1.20 (from RM1.08) based on 10% discount to FD SOP: RM1.32, given the strong earnings recovery and attractive dividend yield.

Above expectations. Core PATMI surged to RM328.7m in 2QFY23 (+1.1x QoQ; +12.4x YoY), boosting 1HFY23 to RM483.2m (+2.8x YoY). The results were above HLIB FY23 expectation (88.6%) and consensus (114.2%), mainly driven by higher contributions of Singapore Seraya Power and Investment Holding. In 1HFY23, there were EIs of -RM54.0m, mainly due to -RM43.0m on impairments/provisions and -RM18.0m fair value loss on investments, partially offsets by RM5.8m unrealised forex gain.

Dividend. None. Usually Declared in 3Q and 4Q.

QoQ. Core PATMI improved by +1.1x to RM328.7m mainly driven by: (i) contribution from Singapore Seraya Power (on improved retail price and margin); (ii) turnaround of Investment Holdings (higher interest income and other business profits); and (iii) lower tax expenses. These were partially offset by losses in UK Wessex Water on inflationary cost pressure (including index-link interest costs).

YoY & YTD. Core PATMI improved by +12.4x in 2QFY23 and +2.8x in 1HFY23 (to RM483.2m) on higher contribution from Singapore Seraya Power and Investment Holdings, which were partially offset by the downturn of UK Wessex Water and larger losses from Yes Communication on lower project revenues.

Outlook. Post acquisition of Tuaspring in 4QFY22, Singapore Seraya Power has delivered strong results in 1HFY23, leveraging onto the new asset to expand its market share and improve its overall margins. The subsidiary is also expected to gain from the awarded 100MW export/import contract to Singapore from Malaysia and building electric charging points (not less than 1,200 units) at Housing & Development Board carparks in Singapore. However, UK Wessex Water is expected to face continued inflationary pressures until the tariff revision (to reflect inflationary rate) in April 2023. The group is also investing into Green Data Centre business (first development with Sea Limited), supported by its planned development of 500MW LSS in Kulai. Furthermore, the group will also leverage onto the awarded digital banking license (Sea Limited-YTLP consortium), targeting the MSMEs segment. Yes Communication will continue to leverage onto the JENDELA network to expand its services and subscriber base.

Forecast. We have adjusted earnings for FY23-25f by +30.0%, +27.3% and +15.0% respectively to account for higher revenue and improved margins.

Maintain BUY, TP: RM1.20. We uphold our BUY recommendation, with a higher TP: RM1.20 (from RM1.08), based on 10% discount to FD SOP: RM1.32, as we believe the current valuation is relatively undemanding, given the strong earnings recovery of Singapore Seraya Power while dividends may surprise on the upside.

Source: Hong Leong Investment Bank Research - 24 Feb 2023

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