PETALING JAYA: A more meaningful re-rating on YTL Corp Bhd
’s stock will only happen if the group’s key unlisted businesses show greater earnings visibility, CGS International (CGSI) Research says.
“In our view, more sustainable external construction, new order wins and aggressive plans to unlock value from its property business would be re-rating catalysts,” the research house said in a report yesterday.
This followed YTL Corp’s recent analyst briefing, where the key message was on the implied negative valuation of RM8.3bil assigned by the market to its unlisted businesses.
YTL Corp said the group is committed to building a more sustainable business outside its main listed companies, YTL Power International Bhd and Malayan Cement Bhd, which collectively contribute 85% to 87% of the financial year 2026 (FY26) to FY28 forecast pre-tax profit.
On its construction business, YTL Corp has a RM20bil to RM25bil tender book comprising largely external projects (Johor e-ART, Penang LRT systems, rail bridge from Penang Island to the mainland and other overseas rail/metro projects).
It also said Malayan Cement is still seeing resilient demand particularly for ready mixed concrete, despite some cost pressures from higher coal prices.
YTL Corp also believes that the earnings before income tax, depreciation and amortisation margins should be largely sustainable.
“There is no indication of a potential average selling price (ASP) increase as yet, but we believe it is no longer giving rebates,” CGSI Research added.
It noted there is higher intrinsic value for YTL Corp’s other unlisted businesses.
A case in point is its 165 acres of land in Sentul, which will already be worth RM1.2bil at its book value of RM163 per sq ft.
“We estimate the total gross development value of 165 acres is RM24bil (plot ratio of six times, ASP of RM800 per sq ft and return on net asset value of RM3.6bil), which may be conservative given secondary prices for its earlier launches are being transacted at RM600 to RM800 per sq ft,” said CGSI Research.
Unlisted entities and landbank
In addition, YTL Corp has 1,525 acres of land in Niseko, Japan, which it acquired in 2010 for RM223mil.
CGSI Research has reiterated an “add” call on YTL Corp with a target price of RM2.68 per share.
Meanwhile, MBSB Research concurred with YTL Corp’s management’s view that the stock is currently undervalued, in the sense that the market may be overlooking its unlisted entities and landbank.
“We think potential monetisation, listings or partial stake sales could help crystallise this hidden value and narrow the valuation gap over time,” the research house said in the note to clients yesterday.
MBSB Research has kept a “buy” call on YTL Corp with an unchanged target price of RM3.44 a share.
It continues to like YTL Corp as it is well-positioned to ride the infrastructure upcycle as well as its strategic venture into data centres and renewable energy via its utilities division.
The group’s cement and building materials business is also a direct beneficiary of a strong construction sector, with projects such as warehouses, data centres and residential projects, as well as the upcoming Johor-Singapore Special Economic Zone, set to serve as a new growth catalyst.
