PETALING JAYA: YTL Corp Bhd
could see earnings growth accelerate in its financial year ending June 30, 2028 (FY28), supported by expanding data centre (DC) operations, stronger water utility earnings and higher cement sales, while a widening valuation gap with its listed subsidiary offers scope for a share price re-rating.
The group is expected to deliver broadly flat earnings in FY27 before its bottom line grows by about 10% in FY28, as its utilities and cement businesses provide a stable earnings base.
According to Hong Leong Investment Bank (HLIB) Research, YTL has significant upside as it is currently undervalued despite growth of its subsidiaries.
“We view YTL as highly undervalued, with re-rating catalysts arising from the unjustified wide valuation gap between YTL and YTL Power International Bhd (YTLP); valuation crystallisation from the potential listing of YTL DC, driving positive re-rating spillover to YTL, and potential direct exposure to YTL DC via an in-specie share distribution,” the research house explained.
It ascribed a fair value of RM3.50 for YTL based on a 20% discount to its sum-of-parts valuation of RM4.37, with further upside potential from the exercise of its YTLP warrants.
It maintains a “buy” recommendation on YTLP, with a target price of RM8.08, citing growth opportunities from its DC ambitions.
The research house said the valuation gap between YTL and YTLP had widened significantly, with YTLP’s market capitalisation rising about 53% year-to-date, compared with a decline of around 3% for YTL.
“This divergence has reached a point where the market value of YTL’s 52% stake in YTLP is now broadly equivalent to YTL’s entire market cap,” it said.
“In other words, the market is effectively ascribing little-to-no value to YTL’s other businesses,” it added.
On the possible initial public offering of YTL DC in 2027, HLIB Research noted that a potential in-specie distribution of YTL DC shares by YTLP could also give investors more direct exposure to the business.
YTL Cement remains another earnings pillar, with pre-tax profit rising 30% in FY26, supported by Malayan Cement Bhd (MCement) and its Singapore operations.
Higher cement demand from the Penang Mutiara light rail transit project and potentially Johor’s electronic autonomous rapid transit system could support sales, alongside the eventual rollout of the Mass Rapid Transit 3 project.
HLIB Research expects alternative fuels, which account for about 15% of MCement’s fuel consumption, to help mitigate higher fuel costs.
It has a “buy” call on MCement with a target price of RM8.71.
YTL Construction’s outstanding order book stood at about RM2bil as at June 2026, mainly comprising YTLP’s DC projects.
Its RM10bil to RM15bil tender book includes industrial warehouses, water treatment plants, a Singapore rail project, the Penang LRT project and Penang airport expansion.
Meanwhile, one analyst noted that YTL’s diversified earnings base provides a degree of resilience, while its exposure to DCs offers a longer-term growth avenue as demand for digital infrastructure continues to expand.
“The key revaluation trigger lies in whether the group can translate its underlying asset value and expansion plans into stronger earnings visibility and improved shareholder returns,” he told StarBiz.
