Synergistic benefits for YTL from NSL stake buy


CGSI Research views the acquisition as timely with the rapid expansion of its data centre business in Kulai, Johor.

KUALA LUMPUR: YTL Corp Bhd’s acquisition of a majority stake in a Singapore-listed building materials company is expected to result in a marginal increase in the net gearing of the Malaysian engineering and construction conglomerate.

According to CGS International (CGSI) Research, YTL’s net gearing could increase to 1.62 times from 1.59 times as at June 2023, assuming the proposed acquisition did not result in a mandatory general offer (MGO).

Should an MGO be undertaken, YTL’s net gearing could increase to 1.63 times, the brokerage estimated.

YTL on Monday announced that its subsidiary YTL Cement had signed a conditional sale and purchase agreement for the proposed acquisition of 81.2% in NSL Ltd for S$227.6mil (RM792.3mil).

This translated into S$0.75 a share, a 7% premium to its last closing price of S$0.70. The acquisition would be funded via a combination of internally generated funds and borrowings.

YTL Cement would be required to undertake a proposed MGO to acquire the remaining 18.8% in NSL, bringing the total acquisition amount to S$280mil.

However, YTL Cement’s intention was to maintain the listing status of NSL, which is principally involved in the manufacturing and sale of building materials, oil and petroleum-related products and provision of environmental services.

“In our view, this could be a timely acquisition with the rapid expansion of its data centre business in Kulai, Johor, where the use of precast concrete components could expedite the speed of construction,” CGSI Research said.

Additionally, it noted the slew of mega projects in Singapore, such as Changi Terminal 5 (S$10bil), Integrated Resorts Expansion (S$9bil), Tuas Mega Port (S$20bil) and the mass rapid transit projects (S$57bil), to be awarded over the next few years might encourage the use of precast components and is synergistic to YTL’s cement business.

“More importantly, this acquisition could also enable it to increase its external related order book for construction, which is currently being dominated by internal projects,” it added.

CGSI Research reiterated a “hold” call on YTL, with an unchanged price of RM3.88.

Meanwhile, MIDF Research said the proposed acquisition of the NSL stake is expected to create synergistic benefits to the YTL group while opening doors to new markets for the company.

“YTL’s acquisition of NSL will open the doors to the industrialised building system business in Malaysia, Singapore, Dubai and Finland. This will synergise well with YTL Cement’s business, which comes at an opportune time in light of the boom in data centres and industrial buildings in Malaysia, where precast concrete components are expected to facilitate the speed of construction,” MIDF Research said.

“Apart from penetrating new markets, the acquisition also allows YTL Cement to expand into the environmental services business,” it added.

MIDF Research has maintained its “buy” call on YTL with an unchanged target price of RM4.19.

“We continue to like YTL as a beneficiary of the infrastructure upcycle, given its dominant share of domestic cement supply; its strategic venture into data centres and renewable energy via its utilities division.

“We view the proposed acquisition of NSL as a positive one for YTL,” it explained.

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