YTL Power to stick to investing in regulated assets

Fundamentally, Maybank IB Research considered YTL Power’s current risk-reward profile as being merely balanced.

PETALING JAYA: YTL Power International Bhd (YTL Power) is unlikely to diversify aggressively into renewable energy due to the lean returns from such projects, according to Maybank Investment Bank Research (MaybankIB).

The research house noted the utility conglomerate’s willingness to participate in greenfield coal-fired plants suggests its environmental, social and governance (ESG) concern.

“Given YTL Power’s considerable coal exposure, the company will have to contend with the environmental stigma for the considerable future.

“Being family-controlled, the group can maintain its returns-oriented focus even in the face of ESG scrutiny, ” MaybankIB said yesterday.

“We thus expect the group to maintain its current strategy of investing in regulated assets with long-term concessions and attractive returns for the foreseeable future. Aggressive renewable diversification appears unlikely in our view given lean project returns in the space, ” it said.

Fundamentally, it considered YTL Power’s current risk-reward profile as being merely balanced.

It maintained “hold” on the counter, with an unchanged target price of 67 sen.

YTL Power’s coal exposure came through its 20% effective stake in Jawa Power, a coal-fired power plant in Indonesia with a power-purchase agreement expiring in 2030. Despite being only an associate, Jawa Power is YTL Power’s second-biggest net-profit contributor.

On the governance metrics, MaybankIB noted that despite YTL Power being family-controlled, there had not been any questionable related-party transaction undertaken by YTL Power.

The research house pointed out that while YTL Power did not have a set dividend policy, the company had been proactive with capital management, having paid out relatively generous cash or stock dividends every year.

The company was also active in share buybacks, it noted.