YTL Power‘s solid financial performance drives stock to RM1.24, the highest in five years
TWC – YTL Power International Bhd experienced a significant surge in its stock price, closing at a five-year high of RM1.24 on Friday, May 26. This marks a notable increase of nine sen or 7.83% since its last peak of RM1.27 on July 24, 2018. The impressive performance comes after the company’s latest financial results surpassed analysts’ expectations.
With a market capitalization of RM10.12 billion, YTL Power showcased its strength as one of the most active stocks on Bursa Malaysia during Friday’s morning trading session. The company emerged as the seventh most active stock on the local bourse, with a trading volume of 15.41 million shares—triple its 200-day average volume of 5.29 million. As the market closed, the trading volume soared to an impressive 42.26 million shares.
Analysts adjusted their projections for YTL Power’s stock price following the release of the company’s third-quarter and nine-month financial results for March 31, 2023 (3QFY2023 and 9MFY2023). Maybank Investment Bank raised its target price (TP) from RM1 to RM1.50, while Hong Leong Investment Bank (HLIB) Research adjusted its TP to RM2.05 from RM1.50. Kenanga Research also raised its TP to RM1.48 from RM1.09.
According to analysts, YTL Power’s strong earnings were primarily driven by its subsidiary, YTL PowerSeraya Pte Ltd, based in Singapore. This growth was partially offset by Wessex Water Services Ltd losses, partly attributed to index-linked interest costs.
YTL PowerSeraya Pte Ltd demonstrated exceptional earnings performance, benefiting from the acquisition of Tuaspring Pte Ltd’s 396MW combined cycle gas turbine power plant in Singapore during the fourth quarter of FY2022. The subsidiary effectively leveraged this new asset, higher retail prices, and locked-in low gas prices to expand its market share and improve overall margins. Moreover, the subsidiary is set to benefit from the awarded 100MW export/import contract to Singapore from Malaysia and the development of electric charging points in Singapore’s Housing & Development Board carparks.
YTL Power’s outlook remains positive, with the recent approval from the Malaysian government to export renewable energy (RE) to Singapore. The company intends to capitalize on this opportunity, seeking further earnings growth through RE exports. Additionally, the anticipated tariff revision of a 9% increase effective April 2023 is expected to facilitate the turnaround of Wessex Water in subsequent quarters.
While YTL Power has succeeded in various areas, concerns linger over Yes Communications, which experienced a sharp decline in services revenue. However, the subsidiary continues to explore innovative 5G services by leveraging Digital Nasional Bhd (DNB).
The company is actively pursuing other ventures, such as developing the YTL Green Data Centre in collaboration with Sea Ltd and establishing a 500MW large-scale solar farm in Kulai. Furthermore, YTL Power aims to leverage the awarded digital banking license in partnership with Sea Ltd, targeting the micro, small, and medium enterprises (MSMEs) segment.
HLIB Research’s Daniel Wong reaffirmed his “buy” rating on YTL Power, emphasizing the company’s positive outlook and growth potential. Maybank Research analyst Tan Chi Wei also expressed optimism, expecting continued earnings elevation in the upcoming quarters, driven by seasonal trends in Singapore’s generation and the impending tariff hike at Wessex Water. Tan further confirmed YTL Power as their preferred pick in the utility sector.
Teh Kian Yeong of Kenanga Research adjusted earnings forecasts to reflect higher retail prices for YTL Power’s power generation business in Singapore. The research house upgraded its sum-of-parts (SOP)-based TP to RM1.48 from RM1.09, considering various factors such as valuation updates for the Singapore power generation unit, including the data center business, and adjustments to net cash positions.
With its robust financial performance and positive market outlook, YTL Power International Bhd is positioned as a critical player in the utility industry, attracting investor confidence and signaling a promising future for the company.