These local banks who have issued call warrants on YTLP but have not fully hedged their positions will suffer badly. Too much gaming will hurt them more, compared to just doing a fully hedged call warrant issuance and earning the upfront 10%-20% premium on issue price

@probability, correct, many of these local analysts are too pessimistic on YTLP earnings projection beyond FY2024, they are expecting PowerSeraya earnings to drop by half or more from FY2023 levels which is ridiculous. I guess this is the only way for them to justify a low valuation for YTL Power. As comparison, these analysts project that international prices will jump up by more than 10% in 2024 to justify a 20% increase in earnings for Press Metal, which itself is hard to justify, given that they already got it wrong with aluminium prices and PMEtal earnings for 2023.

For a non-biased view on YTL Power, I suggest you read the research report from Hong Leong who has not issued any call warrant on YTLP and who has reported fairly the outlook of YTLP over next 3 years based on management feedback.

Another one is Yahoo Finance who has also not issued any call warrant on YTLP. Yahoo has given a non-biased and fair projection of YTLP cashflows in next few years and hence a fair DCF value of YTLP.

@cgtan2020, whether or not PetChem and PMetal are classified as utilities stock, it does not matter lah. Would you invest in a stock purely based on which category it is in?

If we look at YTLP's closest peers Tenaga and Malakoff, it shows the same conclusion.

Tenaga Q3 net profit at RM856m (not much different from YTLP's RM850m), CIMB projects Tenaga full FY2023 net profit at RM3.2b

Malakoff is loss making, no need to calculate at all

Tenaga market cap is now RM57.8bn, hence PER is at 18.1x. It is still trading at over 3 times the valuation of YTLPower.

CIMB values Tenaga at RM12.00 or RM69 billion, based on DCF valuation. It says Tenaga is cheap trading at EV/EBITDA of 5x. If it uses similar valuation on YTLP, it should value YTLP at over RM3.00 per share.

Sometimes these local research houses have own agenda when giving target prices to certain stocks, especially those who have issued call warrants on the stock.

Based on results announced last night from the other 2 utilities companies, I take a simple comparison of their market cap with YTL Power:

Petronas Chemicals - Q3 net profit RM424m, CIMB projects full year NPAT at RM2.2b
Press Metal - Q3 FY2023 net profit RM308, Hong Leong projects full FY2023 net at RM1.2b

PetChem PMetal YTLPower
FY2023 net profit RM2.2b RM1.2b RM3.4b (FY2024 June)
Market cap RM56.6b RM39.9b RM18.8b
PER 25.7x 33.2x 5.5x

Even if I take YTLP actual FY2023 net profit of RM2.0b, I will get a PER of just 9.4x. This shows that the market has significantly mispriced the share of YTLPower.

Both the earnings of Petronas Chemicals and Press Metal are more volatile than YTLPower's as the former depends very much on international crude oil prices and the spreads, while the latter depends solely on international aluminium prices. PetChem net profit is projected by CIMB to drop from RM6.5b in FY2022 to RM2.2b in FY2023, or a drop of 66%, while PMetal net profit is projected by Hong Leong to drop from RM1.42b in FY2022 to RM1.22b in FY2023 or a drop of 14%.

It is totally unjustified for analysts to give a PER of over 20x to PetChem and PMetal while giving a PER of below 6x for YTLPower.

Another set of excellent results!! I think it is a record high quarterly net profit for Wellcall, at least highest since I invested in from 2022.

Free cashflows of RM63 million or 12.7 sen in FY2023 are super strong, enabling Wellcall to declare high dividends of 2.8 sen for Q4.

If these last 2 quarterly results can sustain forward, Wellcall will have even higher operating cashflows for FY2024, which may support total dividend payouts of 10 sen per share or more.

@cgtan2020, thanks for the news link.

It clearly shows that Jordan NEPCO is struggling to find alternative fuel sources. If opting for LNG, NEPCO would incur additional fuel costs of USD63 million a month, or over USD700 million a year. They need YTLP Jordan oil-shale fired power plant more than ever, otherwise the country would face national blackout or incur over USD1.0 billion of additional fuel costs every year.

@Pinky, you just illustrated exactly what I meant. Thanks

@chessgame99, you may be referring to minority interests. YTL Corp books in the entire profit before tax from subsidiaries like YTL Power and MCement, then deduct off the minority interest for stakes it does not own in these subsidiaries

@probability, yes PowerSeraya strong earnings will continue at least to 2026 based on current supply-demand dynamics.

If heat wave hits Singapore again or Singapore economy continues to grow stronger than expected, then peak demand will grow fast and the scheduled new capacity supply in 2026 may not be enough to cater for new power demand and electricity retails margin will stay robust beyond 2026

Singapore dollars strengthens to RM3.502 : SGD1.00. We can expect higher contribution from PowerSeraya in this Dec quarter and beyond

Haha I hope YTL could fly to RM1.70 again soon, but it may take time probably a few weeks

AffinHwang research also raises tp for YTLP from RM2.20 to RM2.70

As said before, I expected this Q1 result to beat most analysts' projection and to prompt upgrades from most analysts.

http://www.hlgs.hongleong.com.my/published/article/A-kMSS1-EOS9do-FB7LReb2O0pHzo_cPVFtoIjdu335ZDudPsl2pPWeXrk1djXENvyLwLERyfnr_BDi8LKrUU6vJwxcoiGlVhCOg0rHNTxk1

Hong Leong research raises tp for YTL Power to RM3.90!

@cgtan2020, the strong performance from PowerSeraya in Q1 FY2024 is well expected as I have explained earlier in numerous occasions. PowerSeraya gross margin is not directly affected by gas prices while its revenue is more directly linked to gas prices.

Its gross margin is mostly locked in retails contracts (that last from 6 months to 2 years) and vesting contracts. Retails contract margin is determined based on supply and demand, while vesting contract margin is determined by EMA every 2 years.

That's why I expect PowerSeraya strong earnings to continue into 2026 at least, then we shall see how the peak demand growth will be able to match the scheduled commissioning of Keppel new CCGT unit in 2026.

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

for your leisure reading

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

MCement reported substantially higher profits for the latest quarter, operating cashflows are strong. We can expect super good dividends in FY2024

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

YTL quarterly result is very good, powered up by YTL Power and MCement

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

Another excellent set of quarterly results from YTL Power

To the contrary of what was said above, the reason why Francis Yeoh was invited to an interview by Bloomberg was because of the huge interests of foreign funds in YTL and YTL Power shares

@probability, thanks for the video link.

As usual, Francis Yeoh did not give away much even when pressed by the Bloomberg journalists. We can see that foreign funds are pretty much interested to know about the growth potential of the YTL group, especially on KL-Singapore HSR project, 5G business expansion, green data centre, digital bank and potential M&A deals.

thanks for the update @probability

@probability, mind sharing the link for the interview?

Good morning, Mr. OTB.

Thanks for the link on Yahoo finance valuation on YTL Power. That shows clearly YTLP is under-valued based on DCF methodology, inline with what I have been saying about the strong cashflows of the company.

@chessgame99, as said before, I expect YTLPower Q1 FY2024 net profit to comfortably beat RM700 million. I hope it can reach RM800 million a quarter or RM3.2 billion for FY2024. That would justify a valuation of RM4.00 in 2024 based on 10x PER.

When to take profit? I don't know. My entry price is around RM0.70, I don't really care much about the paper gain really. As long as the company earnings and cashflows remain strong and there is continued growth, I see no reason in letting go of my holdings on YTL Power. As I expect YTLPower operating cashflows to be over 40 sen a share every year going forward, and dividend to be over 12-15 sen p.a., with my low entry cost, I will enjoy dividend yields of 15% to 20% p.a. for my YTLP holdings for years to come. That will beat any fixed deposit rates or bond yields, why should I sell then?

I just cite an example to illustrate the benefits of long term investment on good companies with growth potential. Take McDonalds as a classic case. If you invested US$1,000 in the IPO of McDonalds in 1965 and held onto it for 33 years until 1999, your investment would have ballooned to a value of US$15,700,000 or 15,700 times! Had you held onto it a few years longer to 2005, your investment value would have grown to over US$30 million for a total gain of 30,000 times in 40 years. That was a compounded growth rate of about 22% p.a. for 40 years.

Closer to home, if you invested in YTL Corp or Public Bank in early 1980s and held on for 20 years to 1998, you would have seen your investment value expanded by 30 times.

Of course, every investor has different time horizon for investment returns. Most will sell off after seeing a quick 50% or 100% gain as they are afraid of share price correction or they see better opportunities in other stocks. To me there is no right or wrong, you may just take whatever strategy that suits your own financial goals.

I may take some profit off YTLP when its share price rises too fast beyond RM5.00 and when I see opportunity in another good stock that may give me higher returns in long runs. Before that, I shall just continue collecting 15%-20% dividend yields every year as good passive income to fund my living and office expenses.

Good luck to all.

@Nepo, that's a great news for MCement. With its increasingly solid fundamentals and earnings (as demonstrated by Hume Cement earlier this week), MCement will attract the attention of more foreign funds.

I am confident it will break up RM4.00 soon, helping YTL to scale new highs.

Good break up!!

@harvest6138, I also cannot find monthly data on electricity consumption in Singapore but I have got monthly data on electricity generation (which is about 4.6% higher than consumption on average).

First 6 months of electricity generation in 1H 2023 was 28,241 GWh vs 28,377 GWh in 1H 2022.

July + Aug 2023 electricity generation totals 9,877 GWh vs 9,874 GWh in Jul-Aug 2022.

@harvest6138, there will certainly be the case. A good management always tries to innovate and diversify income base.

We see that PowerSeraya has already turned around from losses just 2-3 years ago to making good decent profits. Wessex Waters is suffering from temporary setbacks of high inflation and high interest rates in the UK, but will certainly bounce back as soon as April 2024.

I see that Yes 5G business segment is making good progress in capturing more customers and expect this segment to start making profits as soon as this Q1 FY2024.

Next, the 1st phase data centre park will start contributing profits from Q1 next year.

Then the digital bank venture with SEA will be able to make profits within 2-3 years, sooner or later, as demonstrated by SEA Group's own digital bank which already achieved EBITDA positive early this year.

More will come from subsequent phases of green data centre jobs, Selangor WTE plant from 2026, potential new solar power bids in next 5-7 years, potential RE export to Singapore etc.

I am sure YTL Power management team is always on the look out for good M&A opportunities as well, as we can see its entry into Ranhill Utilities which itself is a good strategic move.

Finally after 2 quarters of false start

For longer term investors like myself, I always love dividends, especially those stocks that give dividend yields higher than FD rates and EPF dividend rates. These form important passive income to me as well as providing a key support to long term share price.

Not to worry. Some traders prefer not to have dividend as share price will adjust down after dividend goes ex. Let these traders sell off their short term holdings then share price will have meaningful rebound.

I see RM2.18 as a strong support.

I think MLFF project should be under YTL. Have they got it?

PowerSeraya's retails market share should be maintaining at steady level in past few quarters as there was no new generating capacity coming into the market. The only thing different was that PowerSeraya has acquired Tuaspring earlier this year, so PowerSeraya now has bigger capacity to sell through its retails arm.

@kiasu9583, PowerSeraya earnings are not directly linked to USEP price fluctuations, as over 95% of its revenue is locked in through retails contracts and vesting contracts. No doubt USEP has come down a bit in Jul-Sep quarter compared to highs in April-June 2023 quarter, that should only affect a small quantity of long generation into the pool, no big impact.

@goody99, each of the growth items in my list above would provide meaningful earnings contribution of over RM100 million a year to several hundred million ringgit a year.

As the company has indicated before, the 1st phase of green data centre would contribute profit before tax of around RM100 million a year, so if the company can secure more green data centre jobs to fill up the 500MW capacity at Kulai site, earnings contribution from data centre segment would jump by 7 times. Once the project debts associated with these data centre jobs are fully repaid in 10-15 years, the project operating cashflows from all these data centre jobs would exceed RM1.0 billion a year.

Wessex Waters will turn in substantially higher earnings from 2025 onwards after it secures another 2 rounds of water tariff hikes in April 2024 and April 2025, and after its RCV expands to beyond 4.0 billion pounds sterling then. Remember Wessex Waters used to contribute PBT of over RM800 million a year just few years back. With the expanded RCV, I won't be surprised if Wessex would contribute PBT of over RM1.0 billion a year from FY2026.

The potential solar power projects to be secured in Malaysia and potential RE export to Singapore will be a volume game, providing decent low teens returns but low risks. As a simple guide, a 1000MW solar power project secured locally will contribute EBITDA of over RM300 million a year.

Foreigners reversed to selling position in October. As the ringgit depreciated by 5.6% MoM against the dollar and 10-year US treasury yields rose 100bps to 4.92% from 1 August 2023, foreigners completely reversed the purchases of RM2.2bil equities over 3 months for the period July-September 2023 in October (Exhibit 6-8). They were net sellers mainly in financial services (64%), consumer products/services (27%) and energy (4%) involving Hong Leong Bank, Maybank, Public Bank, RHB Bank, CIMB, IHH Healthcare, Malaysian Airports, PPB Group and Nestle (Exhibit 2). However, foreigners bought into YTL Corp, YTL Power, Inari Amertron, Sunway, Sime Properties, Boustead Plantation, Gas Malaysia and IJM Corp.

from Am Research

Foreigners reversed to selling position in October. As the ringgit depreciated by 5.6% MoM against the dollar and 10-year US treasury yields rose 100bps to 4.92% from 1 August 2023, foreigners completely reversed the purchases of RM2.2bil equities over 3 months for the period July-September 2023 in October (Exhibit 6-8). They were net sellers mainly in financial services (64%), consumer products/services (27%) and energy (4%) involving Hong Leong Bank, Maybank, Public Bank, RHB Bank, CIMB, IHH Healthcare, Malaysian Airports, PPB Group and Nestle (Exhibit 2). However, foreigners bought into YTL Corp, YTL Power, Inari Amertron, Sunway, Sime Properties, Boustead Plantation, Gas Malaysia and IJM Corp.

From Am Research

@Abcdefg123456789, you are most welcome. We are here to make big money, not to insult each other.

@pang72, Ranhill does not control Sabah electricity but has the largest gas fired power plant in western Sabah with 380MW. The proposed new electricity interconnector to link the power source in western Sabah to eastern portions will enhance power generation by Ranhill gas plants.

Ranhill was cheap before the news, trading at forward PER of just 7x, with operating cashflows of over 15 sen per share, vs share price of 60 sen in past 1 month

Good move by YTL Power. It is a direct path to gaining control to the prime water concession in Johor

@probability, yes we are enjoying the best of both worlds by staying in Malaysia and investing in YTL Power.

See the peak demand grew by an astonishing 8% from 7.3 GW in Feb 2023 to 7.9 GW in May 2023. That's what I have been calling for since last year that Singapore electricity supply is in extremely tight situation. This will continue for another 2 years until the new gas plants from Keppel & Sembcorp comes online in 2026. Even these two new plants may not be sufficient to meet the surging peak demand built up over next 2 years.

Even if we use a lower peak demand growth of 5% p.a. (vs 8% in past few months), Singapore peak demand will increase by almost 800MW by 2025 and by 1.2GW by 2026, so the new 1.2GW from Keppel and Sembcorp will be just enough to meet the expected peak demand increase in next 3 years to 2026.

Yes @Cryptolover, this is very attractive price to accumulate for long term investment.

Strong operating cashflows of over 30 sen per share every year can support dividend payouts of at least 9 sen to 15 sen a year, giving potential yields of 5% to 9%

Ammonia can be used for power generation, fuel replacement for coal in cement plant or other heavy industries and for bunkering fuel.

Singapore is moving fast on this initiatives, while Malaysia is still only talking on drawing board stuck with Tenaga

@cgtan2020, ammonia can be produced 100% green by using solar power or hydro power, and is used as a green fuel to replace high carbon fuel like coal, heavy fuel oil and even natural gas. It fulfills the green agenda or ESG requirements of many MNCs.

The other advantage of ammonia is that it is easier to store and transport, easier than green hydrogen.

The other advantage is cost, the cost of ammonia production is more or less fixed for decades once the capital costs for the solar power or hydro power and ammonia production plant are locked in. Hence it can be a cheaper fuel option when oil & gas prices are high. My own estimate is that the cost of generation using green ammonia may be cheaper than gas generation when brent crude oil price is above US$85-90/bbl.

@cgtan2020, this new ammonia development project in Singapore is potentially a big contributor to future earnings of YTL Power if PowerSeraya wins it.

It will be Item No. 11 in my list above to ensure earnings continuity for YTL Power beyond FY2025

@Alex Chua, that would be what I thought to be a win-win situation for both Nepco and Attarat Power. The PPA terms should be honored as it is, and Attarat could sweenten the deal by installing solar power and selling the extra power to NEPCO at a much lower tariff say US 7.0 cents/kWh, such that the blended tariff would be below US 10 cents/kWh which is the gas tariff at current gas prices.

@harvest6138, you are most welcome. Let's make big money together. Good luck

Though we are disappointed with the government actions (or lack of) so far, I still believe at the end of the day the government and the various industry players will do the right thing to make our national agenda a priority and realised. Lots of patience is required, especially for the present PM to strengthen his political grip so that we shall have political stability for at least 3 to 4 years for the various right policy to implement.

Meanwhile, we can fall back to overseas contributions (PowerSeraya, Wessex Waters, Jordan Power and Indonesia JawaPower）to continue contributing the bulk of the profits to YTL Power in next 2 to 3 years before the local mega projects start to kick off.

@harves6138, I have since updated the earnings projection in my subsequent update reports, the latest being this one:

https://klse.i3investor.com/web/blog/detail/dragon328/2023-08-24-story-h-241866920-YTL_YTL_Power_Electrifying_Up_to_Record_Profits

PowerSeraya earnings have indeed exceeded my wildest projection back in April 2022, then gross margin projected max at S$450 million and PBT of S$371 million a year. Now PowerSeraya is doing a base PBT of S$232 million based on my last estimate in end August 2023. Now I understand that total debts in PowerSeraya have almost halved to just above S$1.0 billion and so interest expenses are also halved now, pushing PBT towards S$240 million.

Then you will need to take into account of the strong Singapore dollars which just broke RM3.50 days ago.