KUALA LUMPUR: A blistering rally in YTL Power International Bhd
this year has scope to continue as better performance from its overseas assets brightens the earnings outlook for the Malaysian power producer.
The share price has more than tripled in 2023, making it the biggest gainer among local companies with a market capitalisation of more than RM1bil (US$214mil).
Analysts are still calling for a “buy” in the stock, predicting that it could climb as much as 60% next year.
YTL Power and its conglomerate parent joined the benchmark FBM KLCI Index yesterday.
YTL Corp Bhd, controlled by tycoon Tan Sri Francis Yeoh and his siblings, has surged about 230% this year. Both stocks jumped in early trade yesterday before relinquishing gains.
Earnings from YTL Power’s venture in neighbouring Singapore will remain strong next year on elevated retail margins, while contribution from its Wessex Water unit in the UK is expected to improve as inflation slows, according to analysts.
Both countries make up more than 90% of its group revenue.
There could be potential surprises to its earnings outlook too. YTL Power is expected to benefit from Malaysia’s energy transition plans, particularly in the area of renewable-energy exports.
Its tie-up with Nvidia Corp to build an artificial intelligence data centre in Johor is adding to the optimism.
“Having presence on both sides of the border, they definitely have a big advantage” in potential energy exports to Singapore, even though the regulatory framework has yet to be completed, said Hafriz Hezry Harihodin, an analyst at MIDF Research.
YTL Power posted net income of RM2bil on the back of record revenue for the financial year ended June. Its 12-month forward earnings estimate for this quarter alone has risen nearly 28%.
Even after soaring more than 200% in 2023 to a record high earlier this month, valuations remain undemanding. YTL Power is trading at about seven times forward-earnings estimates, compared with its five-year average of almost 13 times.
The company’s improving profitability is also boosting YTL Corp, which derives more than half of its revenue from the power unit.
Another potential “wild card” for the main company – which also has construction, cement and hospitality businesses – is the revival of the Singapore-Malaysia high-speed rail, said Hafriz.
They are “most likely” to put in a bid for the revived project, he said. Malaysia is currently accepting proposals from companies and consortium who are interested in undertaking the rail link. — Bloomberg
