KUALA LUMPUR – A blistering rally in YTL Power International in 2023 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 RM1 billion (S$284 million).
Analysts are still calling for a buy in the stock, predicting that it could climb as much as 60 per cent in 2024.
YTL Power and its conglomerate parent joined the benchmark FBM KLCI Index on Dec 18. YTL Corp, controlled by Malaysian tycoon Francis Yeoh and his siblings, has surged about 230 per cent in 2023.
Both stocks jumped in early trading on Dec 18 before relinquishing gains.
Earnings from YTL Power’s venture in Singapore will remain strong in 2024 on elevated retail margins, while contribution from its Wessex Water unit in Britain is expected to improve as inflation slows, according to analysts. Both countries make up more than 90 per cent 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 US technology firm Nvidia 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 MIDF Research analyst Hafriz Hezry Harihodin.
YTL Power posted net income of RM2 billion 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 per cent.
Even after soaring more than 200 per cent in 2023 to a record high earlier in December, 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 project, said Mr Hafriz.
They are “most likely” to put in a bid for the revived project, he added. Malaysia is accepting proposals from companies and consortiums interested in undertaking the rail link. BLOOMBERG
