KUALA LUMPUR: MIDF Research reaffirmed its buy call on YTL Corp Bhd with an unchanged sum-of-parts-derived target price of RM1.82 on its appointment as a project delivery partners for the Kuala Lumpur-Singapre High Speed Rail (HSR) project.
YTL and TH Properties as a consortium were selected for the Southern portio of the alignment while MRCB-Gamuda were chosen for the Northern portion.
"Using the MRT3 as a yardstick, we think PDP fees could range between 5% to 6% of the civil works portion of the HSR. This was estimated at RM30-RM45b based on recent reports, though exact breakdown between Northern and Southern portion is not yet forthcoming," said the research firm.
It estimates an orderbook expansion of RM600mil to RM1.5bil for YTL based on a 5% to 6% PDP fee assumption, RM30bil to RM45bil civil works portion and a range of estimates for the Southern portion of the alignment.
"This is 5%-13% of YTL’s targeted construction orderbook of RM12b (by year end). However, recognition is likely to be spread over quite a number of years as the HSR is only targeted to be up and running by end 2026."
MIDF Research expects gradual improvement in YTL's construction earnings in 3QFY18 before a step-up in 4QFY18 from commencement of key projects.
It said YTL is targeting an orderbook expansion to RM12bil from RM400mil presently.
Catalysts include the Gemas-JB double tracking project with a total project value of RM8.9b and YTL Power’s RM11bil 1320MW Tanjung Jati power plant (commercial operation date target in
2021) which entails an estimated construction value of RM4bil.
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