@Muyutin, EV car charging can have a big impact on power demand especially in a country like Singapore.

For example, if there are 100,000 EVs charging at night using a 10kW charger at home, the power demand will go up by:
100,000 x 10 kW = 1,000 MW

The average power demand at night in Singapore is about 6,000-6,500MW, so an additional 1,000MW power demand would be a significant 15% increase in night demand.

hng33, you can blame me on trying to defend the stock causing you not able to buy back at lower prices.

But the volume is so big that the share price does not go up just bcoz a few words that I said, or the share price will go down just bcoz of the few remarks you made. YTL share price rally from RM0.70 when I first made the buy call last May until RM1.50 today is because YTLP has shown the numbers and big funds are getting to recognise it. Today 32 million shares of volume is no small fish playing.

@xiaochen, well said.

PS高盈利的关键，是在于电力高需求，导致电供量吃紧。
PS高盈利的关键，是在于电力高需求，导致电供量吃紧。
PS高盈利的关键，是在于电力高需求，导致电供量吃紧。

我个人是不放大USEP的因素，因为2021年，10-12月USEP也是非常的高。2021年，PS并没有高获利。

2022下半年，7-12月，和20231-3月的分别也都差不多一样。但是为何2023 1-3月的盈利会暴涨？电供吃紧咯。

@hng33, you missed the point and missed the fact. The exposure to wholesale market is less than 10%, never at 30%.

Vesting contract price is adjusted every 3 months according to gas prices and FX, and all gencos hedge almost 100% of their vesting contract requirement on both forward gas prices and FX, so gas price fluctuations never affect gencos' earnings from vesting contracts which thelselves are just a form of Contract-for-Differences (CfD). You may want to download the relevant documents on vesting contracts from EMA website to understand better.


It may be right to say that wholesale prices for July-Sept 2023 quarter will be lower than that of April-June 2023 quarter as TPC kicked in from 1st July 2023. Again, it will affect the margin from long generation that sells into the wholesale market, which I estimate is lower than 5% of overall PowerSeraya earnings.

For any stock in a multi-month rally, it is normal to have healthy corrections along the way so that the rally becomes sustainable. When it hits a new high, some will take profit and when it has corrections, it allows others to come in.

YTLPower had a similar correction after it hit a new year high of RM1.36 on 31st May 2023, the next day it went down as much as 10 sen.

Thank you hng33 for giving us the chance to buy low again.

Sembcorp has already announced its results for June 2023 quarter and the result showed that its Singapore power division made good profits. Most of the analysts' reports on Sembcorp following the quarterly result has upgraded the company with higher profit projections and acknowledged that its Singapore power division will continue doing well in next 2 years. You can check and verify this from the various reports available online.

I see today action as a healthy correction to force out weak holders and hence a good buying opportunity for long term investors. It is just like the incident on 20th June 2023 when the news of the EMA introducing the TPC was out and some traders sold the shares of YTL Power down by 15 sen to RM1.15. I managed to scoop up a lot at 1.16-1.18 then. Those who were brave enough on 20th June to buy cheap are now sitting on good profits, despite the healthy correction today

first, PowerSeraya typically hedge over 90% of generation with retails contracts, so the exposure to the wholesale market will never reach 30% as claimed by some quarters.

Secondly, a few small retailers have gone bankrupt and the remaining retailers are mostly have own generation arm. The remaining retailers will not dare to go long on buying all generation from wholesale market and sell to customers. In fact, the EMA has already set regulations to force all retailers to hedge their electricity purchase to 80% minimum. No retailer can buy cheap from wholesale market and sell high to customers in a big way now.

The wholesale electricity prices will naturally soften after the TPC is in place to cap the prices to 2x to 3x Long Run Marginal Costs, which they estimated to be SG$450-700/MWh.

In fact, I am happy to see more steady wholesale electricity prices (without a lot of surges beyond SD$1,000/MWh) so that some smaller retailers can survive and there will not be much complain from consumers. The EMA will also not introduce more drastic measures to intervene in the competitive market.

This leaves gencos to steadily earn decent profits from the retails contracts.

I have said a few times, the fluctuation in wholesale electricity prices does not have much impact on PowerSeraya profits as over 90% of its generation is hedged by retails contracts which last from 6 months to 2 years. PowerSeraya said in end May that the company had managed to lock in retails contracts at good margin for 2 years and locked in gas supply at attractive prices.

Why the rush to sapu 2.8m shares at 1.55 last minute?

This news article mentions that Sembcorp has contracted with Singtel and Micron for long term PPA for 10 year, 80MW and 18 years, 350MW respectively. That partly explain the need for Sembcorp to build a new cogen plant of 600MW. So a big portion of the existing cogen plants has been contracted for long term supply to big clients, leaving not much for the surging peak demand.

https://www.theedgesingapore.com/capital/brokers-calls/analysts-optimistic-sembcorp-industries-all-keep-buy-raised-target-prices

you see both Keppel and Sembcorp are like Government-linked Corporation (GLC) which may be forced to do some sort of national service, hence both have committed to invest in new power plants to meet the power demand growth in next few years. The big 3 (Senoko, Seraya and Tuas) have been privatised and owned by foreign investors who are less likely to invest big money in the competitive market after suffering losses in 2014-2017 when there was an over-capacity in Singapore. Investors are scared of the EMA doing too much intervention and flooding the market with too much capacity hence crashing the power prices.

Hence I am skeptical of the proposed 600MW capacity being solicited by the EMA. It is a free competitive market. When power players think that there will be power demand, they will make a business decision to invest in new capacity. If they think there will be a lot of new capacity coming in, then they will hold back on any new investment. So I am not sure how the EMA is going to solicit this new 600MW plant to be up by 2028. Will there be any incentive offered by the EMA for this new plant? Any guarantee on capacity uptake or profit guarantee? obviously no.

I just hope that the power players in Singapore will be conservative enough not to be too aggressive in new plantups which will hurt everybody in the game.

@Sslee, yes the total power output from the gas turbines and steam turbine will be 600MW. What I wanted to point out was that a cogen plant has other outputs like high pressure steam and demineralised water besides electrical power. Part of the power output is used to generate the high pressure steam which is piped away to nearby industrial plant uses. Hence the net electrical power output is typically lower than the nameplate capacity of the gas turbines + steam turbine.

In fact, Sembcorp already has a cogen plant running, the nameplate capacity is 765MW (if I remember correctly), but the net electrical power output available for export to the power grid is about 500MW. Part of the high pressure steam is piped away for export to nearby industrial plant, instead of all going into the steam turbine to generate electrical power.

I could have missed this Sembcorp cogen plant. Being a cogen plant, part of the power output will be used to generate high pressure steam and demineralised water, so the net power output will be lower than 600MW, typically around 2/3 of nameplate capacity or around 400MW.

So now we have 2 firm new plants coming online in 2026 and another to be solicited by the EMA (not firm). If we factor in all three, total new capacity would be 600+400+600 = 1,600MW coming online by 2028. This would be just enough to meet the projected peak demand growth of 1,500MW - 3,800MW in next 5 years.

@xiaochen, yes based on recent news flows, it appears to be 2 new power units announced so far, one being the 600MW hydrogen-fuel ready unit, another 600MW unit as an open unit solicited by the EMA targeting completion by 2028.

The one tendered out by the EMA is still not certain yet as I am not sure if there is enough interest from private developer to pour in hundreds of millions dollars to develop a big plant when there is no visibility as to when and how much the EMA will bring in RE import. I expect this bidding process itself may take few months to conclude then another few months for the winner to achieve Final Investment Decision, followed by 30-36 months of construction and commissioning.

The Star news article mentions about bullish projections by the EMA of the peak demand in Singapore over the next few years, with peak demand projected to rise by 1,500MW to 3,800MW from currently 7,800MW to 9,300MW - 11,600MW by 2028. So even the proposed 600MW new capacity coming in at end of 2027 and Keppel's 600MW new unit coming in 2026 may not be enough to meet the increase in peak demand in 2028.

That's good development. It shows that the current electricity market in Singapore is very tight and no private developer has any plan to build new power plant besides Keppel. EMA definitely sees the need for a new power plant and hence seeks bid to build a new plant by 2028. But what's the incentives of building a new power plant while the capex of building one is quite high, and there is no certainty that the new power plant can make much money after running in 2028?

No worries. YTL is a bluechip stock that you can hold on and sleep well. Both fundamentals and technical signals look promising for greater heights in coming months

The news reinforced my earlier view that SEM was grossly undervalued.

I have also asked but nobody seems to know what was happening at Tokyo

Heavy volume today and share price closed flat. Good sign

cahsflows wise it will be more straightforward. It will be just cash coming in, even half of PPA payments may be just enough to service the debts

@bullrun2025, if Nepco only pays half of the PPA payments to YTLP Jordan Power, then the other half may be classified as trade receivables and get capitalised in the balance sheet, while the full payment is recognised as profits in the P&L. This is one way of accounting treatment.

On the other hand, if the other half payment is no way in sight of receiving from Nepco, then Jordan Power may not recognise the full PPA payments as revenue in the P&L and hence will book in some losses as its operating costs are more than half the PPA payments.

@Johnzhang, glad that you still have strong conviction in Bplant fair value of above RM2.00.

To be fair, either its 9,000+ ha of strategic landbank (which is conservatively valued at RM4.00 psf) or its 63,000+ ha of plantation estates (which is conservatively valued at RM70,000 per ha) alone should fetch over RM4.0 billion valuation or over RM1.80 per share.

cannot find any news, could be some deal involving Niseko land bank or a corporate deal involving the listed shares in Japan

@goody99, you may probably be right, as I am also looking at around 6 sen EPS for Q4 partly due to your 2 reasons above.

As interest rates got raised by another 0.5% in the past quarter, I suspect there may be more provision in Wessex' index-linked bonds.

Jordan power as you mentioned might incur some start-up costs as the 2nd unit was commissioned. Furthermore, recent news suggests that Nepco had only been paying half of the fees recognised in the PPA.

Zhuge_Liang, I am looking at Genm, Genting, Bonia and Padini besides YTL & YTLPower.

I think the first 2 may have more meaningful rebounds after the state elections.

Bonia and Padini are good consumer plays, both at net cash position and have strong operating cashflows.

thanks bullrun2023. That is about 9% increase as approved

@bullrun2025, what is this 504 pounds with Wessex?

Finally a take-over of BPlant is happening 15 months after my suggestion in this article, coming too late?

@moncmondo87, yes it will then down to which plants having a lower BTU/kWh which depends on the efficiency of the plant itself and the fuel cost.

I suspect even when Keppel new gas plant comes online in 2026, it will not be much more competitive than existing CCGTs as hydrogen fuel will still be more expensive than LNG then.

However, everything is relative in Singapore competitive market, whether or not PowerSeraya has secured cheap LNG prices for next 3 years. If other major players like Senoko and Tuas have also secured LNG prices at about the same price as PowerSeraya, then it won't make much difference in 2025-2026 as to how much LNG prices will be. Everyone will then be still on level playing ground, and the situation will come back to the tight market conditions again to determine the retails margin and wholesale electricity prices.

Until a new generating plant comes online in 2026, the supply market will remain tight.

Hong Leong report mentioned about potential dividend of 15 sen per share for YTLPower for FY2024 and FY2025, guided by YTL chairman's forecast of RM1 billion dividend for YTL for FY24 & FY25. This is in line with my earlier calculations.

The report mentioned about PowerSeraya having secured cheap LNG supply for next 3 years. I am a bit wary of that, especially on the definition of "cheap". If the company secured it during the trough period of COVID in 2020-2021, then the LNG price then can be considered cheap and would cover generation for the 3 years to 2023-2024. If the company secured it after gas prices had recovered in 2022, then it might run some risks as crude oil and LNG prices may fall below its secured price in 2024-2025.

Anyway, for whatever LNG price it has secured, PowerSeraya should have hedged it against the retails contracts for next 2 years, ensuring good retails margin. The challenge may come in after the expiry of the 2-year retails contracts if LNG prices then drops significantly below its secured price.

@stockprincess, got the HL report, thanks

Apparently this Star article was reporting a research report from RHB on YTLPower. Has anyone got this RHB research report? Please PM me, thanks.
Posted by xiaochen > 3 hours ago | Report Abuse

Earnings of utility firms likely to be sustained
This could potentially ensure higher dividend payout for YTL Power (given the stronger profits and cash flow) to 15 sen a share (yielding 11.9%) in financial year 2024 to 2025 versus the house’s conservative assumption of only eight sen a share.
https://www.thestar.com.my/business/business-news/2023/07/11/earnings-of-utility-firms-likely-to-be-sustained

FY2024&25
YTL 9.5 sens
YTLP 15 sens

that's right @probability.

When I first saw the news of these super rich people trying to bring in RE power all the way from Australia via some 5,000km under sea cables, I thought the project would be doomed to fail. Indeed, it did not take off as it did not make any business sense at all.

Where else can you bring in RE power to Singapore cheaper than from Peninsular Malaysia especially from Johor where you can just pull over a 50km overhead transmission line??

@hng33, it is typical of local analysts being slow in doing a drastic upgrade, as it will slap their own face. To me it is okay for CIMB to retain its projected 6 sen dividend for FY2024 and FY2025 and tp of RM1.28. They will have to see substantial earnings improvement in coming quarters before they will convince themselves of what Tan Sri Francis Yeoh was saying on prospects of higher dividends.

In particular, I am excited to see how YTL is going to unlock value of its vast assets in coming years.

@ValueInvestor888, EPF ceased to be a substantial shareholder (stake <5%) in YTLPower on 30 May 2023 so it is not required to make Bursa announcement since then. So we don't know if it is selling anymore. But looking at the selling volume and patterns in YTLP shares, I think EPF is still selling consistently at 20% to 60% of daily volume.

@ChloeTai, right, it is hard for YTLP to jump fast now as EPF is still selling. As it had some 400 million shares last month and assuming it sells on average 4 million shares of YTLP a day, it may still have 320 million shares after 4 weeks of selling.

My estimate is that EPF's stake in YTLP will drop to below 200 million shares by mid August and it will be less aggressive in selling then.

@xiaochen, in the article you shared earlier, it says the average household water bill is around 448 pounds a year or 37.33 pounds a month.

And the proposed 20%-30% rise in water tariffs seems to be for a 5 year period from 2025 to 2030, not a one-year increase.

Wessex got an average rise of c.8% in water tariffs for FY2024, and got a lower rise of c.4% for FY2023. Actually a 8% rise in one year is exceptional, it only happens when the inflation hits double digit in the UK in 2022-2023.

So, a 30% rise for 5 years, i.e. 6% rise each year from 2025 will not be too excessive. It will add about 2.20 pounds a month to household water bill, and won't cause a dent.

@xiaochen, the water bill in the UK is just about 10% to 15% of the total household utilities bill, just like here. We pay about RM15-20 for our water bill every month while paying RM150-300 for electricity bills. There in the UK, water bill may be just around 10-15 pounds a month but household gas and electricity bills may run into 200-500 pounds a month. So the issue of water tariff increase is never a big issue compared to gas and electricity rates.

Thames Water is an isolated case where the holding company holds too much debt of 14 billion pounds until it has problem servicing it. Wessex Waters does not have any debt at the holding company level, all its debts sit at the operating company level and ring-fenced. Wessex gearing ratio is comfortable and has no issue of servicing its debts from operating cashflows.

Correct, YTL will need to preserve some cash to do MRT3 and HSR if it wins them. YTL can declare dividends received from Mcement and YTLP as dividends totalling RM1.0 billion, then reserve the dividends from 2 REITs and construction division for future projects. Potentially YTL could monetise some more peripheral assets if necessary, it just sold a piece of land in Perak for RM70 million.

For YTL to pay RM1 billion dividend, it will need to get some RM600m dividends from YTLPower and RM300m from MCement. So YTLPower will need to pay out RM1.2 billion worth of dividends or 15 sen per share.

As calculated before, YTLPower operating cashflows will be strong at over RM3.0 billion a year for next 3 years, so easily supporting a 40% payout or RM1.2 billion a year.

PowerSeraya cashflows will be higher at S$763m + S$75m (depreciation charges) = S$838 million.

At 7% cashflow yield, PowerSeraya is valued at S$838m/7% = S$11.97 billion.
For a dividend payout of 70%, dividend payouts may be S$587 million a year, at 5% dividend yield (which is very attractive in Singapore) will value PowerSeraya at S$587m/5% = S$11.73 billion.

Whichever way you value it, PowerSeraya is easily worth over S$10.9 billion or RM37.7 billion, if it gets listed in next 3 years.

It would be an opportune time for YTLP to list up PowerSeraya in next 2-3 years as earnings are expected to remain strong.

At Mar 2023 quarter earnings of S$230 million pretax profit, annualised to S$920m PBT or S$763m net profit, PowerSeraya may potentially be worth S$763m x 14.3x = S$10.9 billion. I am taking the average PER of Sembcorp and Keppel which are currently trading at PER of 14.1x to 14.5x.

Hence, PowerSeraya may be worth RM37.7 billion at current exchange rate of S$1.00 = RM3.46. That would be fantastic valuation of RM4.67 per YTLP share.

Wessex + PowerSeraya will give a valuation of almost RM2.35+RM4.67 = RM7.00 per share to YTLPower. Sounds crazy huh?

Let's see.

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

Pls refer to the article again for calculation of Wessex valuation and PowerSeraya should YTLP decide to list up either of them

I reckon that YTL Power should consider listing of Wessex if it can get a valuation of minimum 1.3x RCV.

Otherwise, I would rather wait for another 2 years when UK interest rates will come down and Wessex RCV will increase to 3.89 billion pounds in 2025. Then it may get a valuation of 1.5x RCV or 3.5 billion pounds or RM20.8 billion or RM2.57 per YTLPower share.

Just checked again on valuation of the 3 water companies listed in the UK, United Utilities, Svern Trent and Pennon. Last May when I first calculated, these 3 water companies were trading at PER of 20x to 36x and at 1.27x, 1.42x and 1.488x RCV respectively.

The share price of United Utilities has been hovering around similar level since, while Svern Trent has come down by 10% and Pennon down 20%. This makes their valuation closer at 1.2x to 1.27x RCV.

Now assuming same valuation of 1.2x RCV, Wessex is potentially worth an enterprise value of 3.68 billion pounds (RCV) x 1.2x = 4.416 billion pounds. Minus off net debt of 2.315 billion pounds, the equity value will be about 2.1 billion pounds or RM12.5 billion or RM1.54 per YTLPower share.

Now the valuation of water companies in the UK has come down slightly due to higher interest rates (now 5.0% vs 2.1% last year), but pounds sterling has appreciated some 13.6% against ringgit in past few months to 5.94 now, partially offseting the lower RCV multiple.

At 1.3x RCV, Wessex is worth 2.47 billion pounds or RM14.7 billion or RM1.81 per YTLPower share.

At 1.5x RCV, Wessex is potentially worth 3.2 billion pounds or RM19.0 billion or RM2.35 per YTLPower share.